empty
22.05.2025 12:05 AM
The Bank of England to Slow Down the Pace of Policy Easing

This image is no longer relevant

The Bank of England recently cut interest rates for the second time in 2025, justifying its decision with slowing inflation and steady movement toward the target level. But no sooner had the central bank acted than inflation in the UK jumped from 2.6% year-over-year to 3.5%.

What happened next and the conclusions that followed are clear to all market participants. The next round of monetary policy easing is now likely to be a long way off. Despite assurances from many central bank officials that the inflation spike caused by Donald Trump's tariffs is temporary, such claims remain speculative. Haven't we seen numerous instances where central bank forecasts turned out to be wrong?

Moreover, if inflation rose by nearly 1% in just one month, and core inflation now exceeds the target level by almost double, what are the chances that we won't see another increase in consumer prices by the end of May? And how long will it take for inflation to fall back to 2.6% now that the BoE's monetary policy stance is more dovish than before?

That's precisely what BoE Chief Economist Huw Pill addressed on Tuesday. He noted that inflation and wage growth remain high, which means the pace of interest rate cuts should be slowed. "The momentum behind inflation's path toward 2% is weakening. The risks that could prevent inflation from returning to 2% remain," Pill said. Notably, the April CPI data was released the day after his speech.

Pill took a hawkish position at the May MPC meeting, voting against the rate cut—an assessment that has since proven correct. He emphasized that he had called not for a halt to policy easing, but for a pause. "The pace of rate cuts must be very cautious, given global trade disruptions and changes in wage-setting mechanisms in recent years," Pill concluded. The news backdrop continues to support the pound—and only the pound.

This image is no longer relevant

Wave structure for EUR/USD:

After analyzing the EUR/USD, I conclude that the instrument continues to build a bullish wave segment. In the near term, wave marking will entirely depend on news related to Trump's decisions. This must always be kept in mind. The third wave of the bullish segment has started, and its targets could stretch up to the 1.25 area. Achieving those levels depends solely on Trump's policies and the U.S. position in global trade. Accordingly, I am considering long positions with targets above 1.1572, corresponding to the 423.6% Fibonacci extension. While a de-escalation in the trade war could reverse the uptrend, there are currently no wave-based signals of such a reversal.

This image is no longer relevant

Wave structure for GBP/USD:

The GBP/USD wave pattern has shifted. We are now dealing with a bullish impulse wave segment. Unfortunately, with Trump in office, markets may face numerous shocks and trend reversals that defy wave labeling and any form of technical analysis. The third bullish wave is still forming, with near-term targets at 1.3541 and 1.3714. Therefore, I continue to consider long positions, as the market still shows no interest in reversing the trend.

Core principles of my analysis:

  1. Wave structures should be simple and clear. Complex structures are difficult to trade and often lead to changes.
  2. If you're not confident about the market, it's better to stay out.
  3. There can never be 100% certainty in market direction. Always use Stop-Loss protection.
  4. Wave analysis can be combined with other forms of analysis and trading strategies.
Chin Zhao,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

GBP/USD Overview – June 11. What Will Inflation Influence?

The GBP/USD currency pair fell sharply in the first half of Tuesday but retraced back to its original position in the second half. Traders may have assumed in the morning

Paolo Greco 03:31 2025-06-11 UTC+2

EUR/USD Overview – June 11: Even News About Negotiations Doesn't Help the Dollar

The EUR/USD currency pair continued trading sluggishly on Tuesday, maintaining an upward bias. The macroeconomic backdrop has been absent for two days in a row, but there have been some

Paolo Greco 03:31 2025-06-11 UTC+2

Japan Hopes for a Positive Outcome in Trade Negotiations—Otherwise, Recession and Rising Inflation Loom

The revised estimate of Japan's Q1 GDP showed that the economy contracted less than previously estimated, with consumption figures also revised upward. GDP declined by 0.2% year-over-year instead

Kuvat Raharjo 00:21 2025-06-11 UTC+2

GBP/USD: Labor Market Cools Down, But the Pound Holds Its Ground

The UK labor market data published on Tuesday turned out to be unfavorable for the pound. However, the GBP/USD pair is not rushing to dive downward, as the overall weakness

Irina Manzenko 00:21 2025-06-11 UTC+2

The Dollar Is Doomed, Though It Doesn't Know It Yet

In war, all methods are justified. U.S.–China trade negotiations are ongoing in London, and everything is being utilized—from education to rocket engines. Washington is prepared to make concessions, including lifting

Marek Petkovich 00:21 2025-06-11 UTC+2

The Dollar Stabilized, but It Won't Last Long

The latest CFTC report indicates that the sell-off of the U.S. dollar has either ended or is close to ending. The net short position against major currencies decreased by $1.094

Kuvat Raharjo 18:45 2025-06-10 UTC+2

No News Is Already Good News

Trade negotiations between the United States and China are set to continue for a second day, as both sides aim to ease tensions surrounding technology exports and rare earth elements

Jakub Novak 11:19 2025-06-10 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is under pressure, having failed to consolidate above the 1.1435 level and showing intraday declines toward the psychological level of 1.1400 and below, amid U.S. dollar

Irina Yanina 10:45 2025-06-10 UTC+2

Markets Hope for a Breakthrough in U.S.-China Trade Talks (Gold and GBP/USD May Continue Declining)

Markets have virtually come to a standstill in anticipation of the outcome of the trade negotiations between representatives of China and the United States. So far, there have been

Pati Gani 10:44 2025-06-10 UTC+2

The ECB Is Ready to Wait

The euro and the pound remain within a range against the U.S. dollar, experiencing some pressure following the first day of negotiations between China and the U.S. However, in addition

Jakub Novak 10:27 2025-06-10 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.