BOE on DeckFollowing the Fed last night, all eyes now turn to the BOE today with traders keen to see whether the UK central bank will announce a similar pause or push further with tightening. The heavy drop in August inflation, which allowed the bank to pause in September, stalled last month with CPI sticking at 6.7%. On the back of this reading, expectations have grown a little more mixed. The BOE had expressed a desire to move away from further tightening, however, with the deflationary trend pausing, might we see the BOE hike one last time? Base Case ScenarioThe main issue facing the BOE here is that UK economic conditions (and forecasts) are rapidly deteriorating. With growth forecasts sinking and recession risks looming, the BOE risks pushing the UK outlook lower still if it hikes again. With this in mind, the central scenario today is for the BOE to hold rates steady again, signalling the potential for further tightening if needed, while it awaits the October inflation results. Inflation OutlookIf CPI remains at prior levels or is seen rising we can then expect a further hike from the BOE before year end, which should keep GBP supported on the back of the meeting. However, if the BOE refrains from signalling any further potential tightening, this would likely see GBP sharply lower near-term, especially against higher yielding currencies which are benefiting from fresh USD weakness. Technical Views GBPUSDThe pair has been consolidating over recent weeks, oscillating around the 1.2171 level. Price is now starting to test above it and the bear channel. Given the bullish divergence we’ve seen in momentum studies recently, risks of a bullish reversal are growing with 1.2437 the first objective for bulls on any break higher. More By This Author:US Market Commentary – Thursday, November 2Eurozone Inflation Falls AgainUS Market Commentary From