- The pound initially shot higher during the early hours on Thursday but has since fallen to test the 50 day EMA.
- The little bit of volatility that we saw does make a certain amount of sense, considering that the Bank of England had an interest rate decision and although they didn't change the actual interest rate, there were two members of the Monetary Policy Committee that decided to cut rates, which is two more than we anticipated.
Will England Cut Interest Rates Soon?
So, this does suggest that England may be on the path to cutting before it's all said and done. However, they still need to get a majority to do it and the Swiss already have cut. So, I think this lends itself to still being a situation where buyers are going to be very interested in the GBP/CHF pair, mainly because of the massive interest rate differential.
After all, getting paid at the end of the day makes a huge difference. And of course, if you extrapolate this out into the bond markets and other investment, it does make sense to short the Swiss franc while buying other currencies such as the British pound. That being said, not only do we have the 50 day EMA hanging around in this area, but we also have the 1.13 level offering support and then after that we have the 200 day EMA.
It has been a somewhat relentless grind higher for some time, and it really wasn't until the last couple of weeks that we started to see a little bit of volatility. That makes sense because the 1.15 level is such a massive barrier to overcome. Historically speaking, it's been very important. And if we do eventually break above that level, this pair really could start to take off in that scenario. At that point in time, becomes more or less a “buy-and-hold” type of market, perhaps opening up the possibility of the British pound reaching the Fr.1.20 area, maybe even higher than that.
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