The British pound remains under pressure, as GBP/USD dipped below the 1.55 line in Monday’s European session. The pound has taken another hit after Bank of England MPC member Martin Weale said that British exports could benefit from the pound’s sharp decline. In the UK, Rightmove HPI improved, hitting a three-month high. In the US the markets cheered strong US consumer confidence and manufacturing numbers on Friday. The markets are closed in the US for the Presidents Day holiday.
In the US, UoM Consumer Sentiment and the Empire State Manufacturing Index looked sharp. Consumer Sentiment rose to 76.3 points, exceeding the estimate of 74.8 points. The Manufacturing Index jumped 10 points, well above the forecast of -2.1 points. The markets were pleased with the data, as both indicators have been struggling recently. These numbers come on the heels of excellent US employment data. If US indicators continue to point to an improving US economy, we could see the dollar push higher.
The pound received another jab as the Bank of England’s MPC Member Martin Weale stated that a weaker pound would reduce the country’s current account deficit, and the BOE should not be concerned about an increase in inflation due to the weaker pound. Many analysts viewed Weale’s comments as proof in the pudding for a bearish sentiment towards the British currency. The pound had already lost ground following a negative Inflation Report from the BOE, and the markets remain concerned that the UK’s triple-A rating is in jeopardy.
In other news, the G-20 concluded a two-day meeting on the weekend in Moscow. The talks were attended by finance ministers and central bank governors, and the final statement included a mild comment on the recent volatility in exchange rates. The leaders pledged not to “target our exchange rates for competitive purposes”, and to move more rapidly to market-determined exchange rate systems. The G-20 statement did not make reference to Japan, which has come under fire for monetary policies which have led to free-fall in the value of the Japanese yen. G-20 leaders appear resigned to the yen continuing to slide, but do not want Japanese officials to make public statements which will pull down the currency. Thus, Japan’s major trading partners, although not pleased about the tumbling yen, have tacitly given Japan a green light to continue to stimulate its economy with further monetary easing measures and higher inflation, which will likely have a negative impact on the yen.
GBP/USD for Monday, February 18, 2013
GBP/USD February 18 at 14:50 GMT
1.5477 H: 1.5508 L: 1.5438
The pound continues to remain under pressure from the relentless US dollar. The pair is testing 1.5481 on the upside. The line of 1.5565 is providing stronger resistance. On the downside, 1.5395 is a strong support level.
- Current range: 1.5395 to 1.5481.
Further levels in both directions:
- Below: 1.5395, 1.5309, 1.5203, 1.5175 and 1.5057.
- Above: 1.5481, 1.5565, 1.5685, 1.5720 and 1.5834.
OANDA Open Positions Ratios
The GBP/USD ratio has started off the new trading week quietly, and is not showing any significant activity. The long positions outnumber the short positions by a margin of 2-1, as the bias is strongly towards the pound correcting its sharp downward spiral.
The pound can’t seem to catch a break, as the markets have pounced on a negative BOE inflation report and comments by an MPC member with regard to a weak pound. Look for the British currencny’s troubles to continue.
- 00:01 Rightmove HPI. Actual 2.8%.
*Key releases are highlighted in bold
*All release times are GMT
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.