We agree with those who think that today’s step did not mean the start of a gradual tightening. The regulator just wanted to take back the emergency cut of the last August.
Today’s event determined GBP’s destiny for the upcoming months. The Sterling had its toughie area at 1.3280-1.3300 and slumped to the lows at 1.3098 as the outlook is still dovish.
The Pound could not settle above the higher levels. Our next target to the downside is the October lows at 1.3020. If this area capitulates, the pair might be right back to the August lows.
Let’s keep in mind two more risk factors – the announcement of the new Fed Chief and a tax bill announcement.