Archived IMT (2010.08.18)

WATCH BoE MINUTES: Wednesdays release of the minutes from the August MPC meeting could add to GBP losses. The currency has been hit hard after Tuesdays unexpectedly weak July CPI (see earlier IMT for detail). The inflation story is a big deal. For the past 4 months, strong UK inflation was the main reason why Andrew Sentance of the BoE has been calling for rate hikes . and there were even some expectations that other members would join him. This has also been the MAIN REASON TO THE RALLY IN GBPUSD since June---UK being the only country w/ above target inflation, therefore, the one with most realistic chances of any near term rate hike. HOWEVER, Tuesdays smaller than exp CPI (See previous IMT) changes much of those expectations, which explains Tuesdays GBP selloff, which was a textbook fundamental sell-off, falling against everything even against the weak YEN. Losses were sharpest against AUD and CAD as commodity currencies were especially boosted by Wall Streets rally, which I warned about in yesterdays IMT based on the BULLISH HAMMER CANDLE in indices. The BoE minutes will likely show Andrew Sentence to reiterate his vote for a rate hike, but just in the unlikely event that he is joined by another dissenter, we could see sharp pop higher in GBPUSD. See prev IMT on GBP technicals.