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The Bank of England delivered another interest rate hike.
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The BTC/GBP and GBP/USD pair diverged after the report.
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It has formed a bullish flag pattern on the daily chart.
The BTC to GBP pair moved sideways after the latest Bank of England (BoE) interest rate decision. Bitcoin was trading at £23,000 on Thursday, where it has been in the past few days. This price is about 7.2% below the highest level this month. On the other hand, the GBP/USD pair slipped to a low of 1.2625, the lowest level since June 30th.
Bank of England decision
The BTC/GBP pair moved sideways after the latest interest rate decision by the BoE. In a statement, the bank decided to hike interest rates again by 0.25% to a 15-year high of 5.25%.
The committee did that in a bid to fight the elevated inflation. In a statement, Governor Andrew Bailey said that the hike was necessary to combat the stubbornly high inflation. In a statement, he said:
“Inflation is falling and that’s good news. We know that inflation hits the least well-off hardest and we need to make sure that it falls all the way back to the 2% target. That’s why we’ve raised rates to 5.25% today.”
The most recent data showed that the headline consumer inflation dropped from 8.3% in May to 7.9% in June while wage growth jumped by 7.7%. There are signs that the British economy is slowing.
For example, data published this week by Nationwide showed that the country’s house price index plunged at the fastest pace in over a decade. Still, the bank believes that the UK will narrowly avoid a recession this year.
NEW@bankofengland raises interest rates for 14th successive meeting: up by 0.25 percentage points to 5.25%.
– UK to avoid recession but economy effectively flatlining with 3yrs of near-zero growth, acc to Bank forecasts.
– Rates to stay high for a long time, Bank signals— Ed Conway (@EdConwaySky) August 3, 2023
Bitcoin reacts moderately to the actions of central banks like the Bank of England (BoE), the European Central Bank (ECB), and the Bank of Japan (BoJ). It also reacted mildly to actions of the Federal Reserve, which delivered its last rate hike of the year.
BTC/GBP technical analysis
The daily chart shows that the BTC/GBP pair rose to a key resistance level at 24,711 in July. This was an important price since it was the highest point in April. A closer look shows that the pair has formed a bullish flag pattern. Also, it has risen above the 25-day and 50-day moving averages.
Therefore, the BTC to GBP price will likely have a bullish breakout in the coming weeks. If this happens, the next level to watch will be at 24,711.
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The Bank of England (BoE) has made extensive research on the best format for developing a digital pound to supplement the fiat system.
The Bank of England (BoE) is working on re-establishing the pound as the preferred global reserve currency through a Central Bank Digital Currency (CBDC). The rise of the digital economy post-Covid-19 global pandemic through the cryptocurrency market has most governments thinking about moving to decentralized ledger technologies (DLTs). Moreover, the use of the digital economy is not only sustainable but also scalable to international markets. Consequently, the forex market will significantly benefit from fast verifiable digital currencies and so will the cryptocurrency market.
BoE on Digital Pound Key Selling Features
Over the last few years, the Bank of England has collaborated with different entities in the research of an excellent Central Bank Digital Currency. For instance, in February 2022, the Bank of England and the Massachusetts Institute of Technology (MIT) agreed to collaborate on a twelve-month research project on CBDC. The Bank of England has also conducted several consultations with the public on how to develop and roll out the CBDC.
As a result, the BoE noted that the digital sterling or more popularly called the Britcoin will primarily focus on user privacy. According to Tom Mutton, director of fintech at the Bank of England, the bank may look to other technologies beyond blockchain in developing its CBDC. However, Mutton noted that the Bank will give user data security huge attention in order to ensure the government does not become a tracking agent for the users.
“There will be no data shared with the Bank of England, we will know what transactions have happened but we will have no data on the individual who did it. While the wallet provider would have the user data but won’t have access to their transaction data,” Mutton noted.
Reportedly, the Bank of England is comparing the efficiency of using blockchain technology over traditional conventional ledgers in developing the CBDC that is compatible with the private sector.
“We want to be compatible with distributed-ledger business models in the private sector, but we were not convinced that distributed ledgers offered more efficiency over conventional ledgers,” he added.
Currently, the Bank of England and the Treasury Department are waiting for feedback from the stakeholders which is open until June 30.
Market Outlook
The Bank of England is racing against time to avoid losing its aesthetic attraction to other global currencies like the Chinese Yuan that have already rolled out in the digital format. The launch of the digital pound comes amid a high-interest rate of about 5 percent despite the Bank of England’s Monetary Policy Committee (MPC) trying to bring down inflation to 2 percent.
With the UK operating freely from the shackles of the European Union, its future economic growth prospects are pegged to the relationship the country signs post-Brexit.
U.S. Federal Reserve Chairman Jerome Powell will participate in the Perspectives on Monetary Policy panel before the Thomas Laubach Research Conference hosted by the Federal Reserve Board of Governors on May 19. The market expects a pause or hawkish pause, but Fed officials are more inclined towards raising interest rates.
Before Jerome Powell’s speech, Federal Reserve Bank of New York President John Wiliams and Federal Reserve Board Governor Michelle Bowman shared their monetary policy outlook. Bowman has pushed back against a broad overhaul of banking rules, but agrees with the need for more interest rate hikes to curb the inflation rate to its target. Williams agrees with more rate hikes.
Fed officials including Dallas Fed President Lorie Logan and Fed Governor Philip Jefferson said on Thursday that inflation is still too high and data doesn’t justify pausing a rate hike in June. Moreover, Cleveland Fed President Loretta Mester said Tuesday that the central bank is not yet at the point where it can “hold” rates.
US jobless claims have decreased to 242,000 from 264,000 the previous week, indicating the labor market remains tight. It offered the Federal Reserve an opportunity to implement further interest rate hikes in its efforts to combat inflation.
Bank of England’s Jonathan Haskel believes the jobs market is tight and quantitative tightening may increase to curb inflation. Last week’s 12th rate rise by BOE by another 25 bps signals a strong message amid weak economic data.
Moreover, ECB’s Isabel Schnabel has been direct about the European Central Bank’s aim to keep raising borrowing costs until core inflation reaches 2%.
Also Read: Bitcoin Outlook Bleak As Whales And Miners Offload BTC Amid Fed Chair Powell Speech
Bitcoin Prices To Fall Lower After Fed Chair Powell Speech
Equity markets are edging higher as investors remain optimistic that a deal on the US debt ceiling could be reached this weekend or next week.
The US dollar index (DXY) moves around 103.4, after touching a two-month high of 103.6 on Thursday after jobless claims fall. Moreover, CME FedWatch indicates a 45% probability of another 25 bps, which rose from 15% last week as Fed officials adhere to raising rates further.
BTC price fell 2% in the last 24 hours, with the price currently trading near $26,800. The 24-hour low and high are $26,415 and $27,466, respectively. Whales and miners are selling their BTC holdings in anticipation of fall in BTC price due to macro.
Also Read: Bitcoin Going To The Moon In 2023 Summer, Here’s What Elon Musk Says
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
The growing inflation around the globe is no secret as consumer price indices have hit new highs in both England and the United States. While the U.S feds decided to keep the interest rates unchanged and accelerate bond tapering, the Bank of England (BoE) has a different mindset.
The inflation in the UK hit a 10-year high and the BoE responded by hiking the interest rates as a measure to contain the growing inflation. It also became the first major bank to increase interest rates since the pandemic began. The nine-member Monetary Policy Committee voted 8-1 to raise Bank Rate to 0.25% from 0.1%, with external member Silvana Tenreyro providing the only dissenting voice.
Governor Andrew Bailey said,
“We’re concerned about inflation in the medium term. And we’re seeing things now that can threaten that. So that’s why we have to act,”
The no-change in interest rate by the Feds on Wednesday helped the crypto market trade-in green as the majority of the crypto assets recovered to daily highs. With BOE’s increase in interest rate, the crypto market didn’t really react much it lost the gains from Wednesday.
Can the Omicron variant trigger the next bull rally?
The crypto market had turned bearish in terms of monthly returns starting November and December looks worst as we head towards a new year. Bitcoin (BTC), the top cryptocurrency returned over $49K yesterday but failed to consolidate its position. BTC is currently trading at $47,533 with a 3% decline over the past 24-hours.
Ether (ETH), the second-largest cryptocurrency by market cap also lost $4,000 support again after reclaiming it yesterday. The altcoin is currently trading at $3,948 with eyes set on $4K. It has lost near 1.33% over the past 24-hours.
Apart from the top two cryptocurrencies, the rest of the crypto market also received a similar minor downtrend. As COVID’s third wave starts to show impact in the mainstream market, inflation hedges such as gold and silver will rise first, and just like the end of 2020, we can see a Bitcoin uprise that could extend well into 2022.
Disclaimer
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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