Sterling At Crossroads With BoE Directionless
The GBP/USD remains in a ascending channel and is looking to re-test the lower bound. The 20-Day SMA has been supportive at 1.5157 and another failed test could lead to a reversal targeting the upper bound near 1.5575. Upcoming retail sales and GDP data is forecasted to be positive and considering that the BoE minutes revealed that member Andrew Sentance is pushing for a rate hike we could start to see interest rate expectations start to rise generating sterling support. However, the BoE minutes demonstrated the uncertainty that the committee has over future policy with a rate hike by the end of the year and additional stimulus as real possibilities. Strong fundamental data combined with inflation over the central bank’s 3.0% threshold could see markets start to price in a rate hike leading to a continuation of the current channel, but dimming growth prospects will raise the outlook for additional stimulus and could sink the Pound. Therefore, if see a break below the 20-Day SMA and trend line resistance 1.5125, a short position is favored.
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