Cable slips to test key near-term levels as BOE Saunders reaffirms dovish take

Technical Analysis

Saunders argued that it is better for the BOE to ease too much than too little

GBP/USD H1 28-05
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There was no major mention of negative rates, but Saunders pretty much confirmed more QE to follow at the June meeting with scope for further stimulus measures should they be needed, whilst painting a very subdued picture on the inflation outlook.

On the case of the latter, Saunders acknowledged risks of the UK falling into the ‘lowflation’ trap and that indicates that these easing measures will stay in place for an extended period of time – since inflation won’t pick up any time soon amid the coronavirus crisis.

Cable has eased by about 20 pips from 1.2255 to 1.2234, testing its key hourly moving averages between 1.2232-43 currently.

Keep above these levels and buyers will still maintain near-term control in the pair but break below and sellers will start to try and explore further downside potential.

There is still some support from the lows yesterday just above 1.2200 but a break below that opens up the way for potential retest of the support region around 1.2165-70.

I don’t think what Saunders mentioned is anything that stands out all too much, but it continues to ring the echo chamber of a more dovish BOE and highlights that the pound still has a considerable amount of headwinds – not to mention Brexit risks in the coming weeks.

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