In its November 3 meeting, the Bank of England raised its key Bank rate by 75 basis points to 3.0%, which is the highest in 14 years. With these decisions, now we can say that the UK economy is heading more quickly into recession. Even if the market chaos caused by the unfortunate administration of Liz Truss has more or less subsided since Rishi Sunak took over as Prime Minister, it is still under pressure. The BoE also warns that with the ongoing energy crisis and home-grown political tensions, the UK economy can shrink for the next 18 months.
Bank of England announced the results of its Monetary Policy Committee meeting
After the news and BoE updates, the pound lost ground as market participants concluded that with ongoing risks and weakness seen in the UK economy, BoE can not raise rates as aggressively as the Federal Reserve from now on. As a result, Pound Sterling came under pressure that could continue further. BoE is expecting to increase the rates to 5.25% by end of 2024 and hopes that it would drive inflation well below its target of 2%.
On the political front, new Prime Minister Rishi Sunak is due to snarl comprehensive new fiscal plans for the remainder of the current parliament on November 17.
As a reaction, with an almost 2% intraday loss, cable trading at 1.1161. From a technical point of view, the price moved back under 20-DMA and the OBV trend line. The key pivot still sits at 1.2185 and as long as it is trading under this level, we can count on a further downtrend.