GBP Rallying Ahead of Thursday BOE Meeting

Shop Prices Fall in OctoberThere was better news for UK households today with the latest UK BRC retail monitor showing shop prices fell again last month. Retail prices dropped from 6.2% to 5.2% in October, in an encouraging sign that the cost-of-living crisis is finally starting to ease off in the UK. Today’s decline marks the 5th straight month fall in the reading which is now back at its lowest level since August 2022. The question for traders now is whether the BOE will hold rates steady again when it meets on Thursday or, in wake of CPI stalling at 6.7% last month, opt for a further increase.BOE to Retain Hawkish BiasGiven the loss of disinflationary momentum last month, if the BOE does hold rates steady this week it will likely issue a firm warning regarding the potential for further tightening if needed. Should inflation remain sticky, or even rise, throughout the coming month, this would no doubt lead to the BOE tightening again before year end. As such there are likely hawkish (GBP bullish) risks into Thursday’s meeting. However, traders will be keen to hear the bank’s assessment of the economy on the back of recent weak data which might offset GBP upside if the BOE sounds too concerned over near-term UK economic prospects.Technical ViewsGBPJPYGiven the weakness in JPY currently, GBPJPY is a strong candidate for GBP longs. The pair is now testing the 183.43 resistance once again and with momentum studies bullish, the focus is on a breakout higher and a move up towards the 186.71 level next, stoking a resumption of the broader bull trend.