On Thursday, the Bank of England is expected to leave rates unchanged for the fourth straight month on July 9 at 7:00 ET at an all-time low of 0.50 percent. The central bank’s last policy statement essentially signaled a neutral stance, as no expansions to their quantitative easing (QE) program have been revealed.
That said, the final reading of Q1 GDP for the UK was unexpectedly revised down to an annual rate of -4.9 percent, the lowest since record keeping began in 1956, from -4.1 percent. This leaves GDP at the bottom of the BOE’s previous range of forecasts, and may push them to consider increasing the scope of their QE program, and signs that this is occurring within the BOE’s policy statement on Thursday could weigh heavily on the British pound.
Looking to GBP/JPY, the pair saw steep declines on Wednesday due primarily to the dominant force of risk aversion in the FX markets, and given the extent of the drops in carry trades, the next few days may be filled with consolidations. That said, the GBP/JPY plunge below the pair’s 2009 trendline at 155.00 suggests we’ve seen a medium-term turn in the pair, and it may be worthwhile to sell rallies as long as investor confidence remains shaky.
There are some key levels to watch on Thursday, especially if the BOE issues a biased policy statement: Resistance will come into play at the psychologically important 150.00 level, and resistance from April and May at 151.00. Support should come into play at the 100 SMA at 147.70, followed by the 200 SMA at 145.73.
[I]Source: FXtrek IntelliCharts[/I]