Following the latest Bank of England (BoE) report, sterling added to gains on Monday as the US dollar traded with lack of strong impulse.
The BoE, as expected, left current monetary policy conditions unchanged with the benchmark rate at 0.5% and the asset purchase program at £375 billion pace. Besides this, generally forecasted scenario, market focuses on current Inflation Report to come out on Wednesday, providing fresh outlook on inflation, gdp and labor market.
Mostly inflation and wages play key role for the determination of market sentiment, as prices are expected to be driven by deflation pressure even further in upcoming months.
On the other side, US dollar still struggles with bearish sentiment due to first quarter data, albeit March labor market disappointment has been successfully offset by April non-farm payrolls release.
From fundamental point of view, we believe that the US dollar will gain from a long-term perspective on the grounds of monetary policy tightening, albeit later as previously expected, June’s rate-hike has been successfully postponed to September’s or later term.
As from the technical point of view, currency pair is close to its resistance level at $1.5538, a TP target for bulls, while later a strong resistance may be seen at $1.5736. In case of dollar strengthening, TP could be set at $1.5112 support level, or later at $1.4970.
