GBP/USD continues to post gains on Friday, as the pair trades just above the 1.68 line in the European session. The pound has been red hot, climbing close to 400 points against the dollar over the past week and hitting its highest levels in almost three years. In economic news, the US hopes to get back on track after weak releases on Thursday. Today’s key event is US Preliminary UoM Consumer Sentiment. There are no British releases on Friday.
The markets had little to cheer about on Thursday as all three US key releases disappointed. Unemployment Claims rose to 337 thousand, above the estimate of 331 thousand. This reading comes on the heels of JOLTS Job Openings earlier in the week, which also missed market expectations. Core Retail Sales dropped to 0.0%, a nine-month low. The estimate stood at 0.1%. Retail Sales brought no relief, slipping to -0.4%, short of the estimate of 0.0%. The weak numbers allowed the pound to continue its impressive rally.
BOE Governor Mark Carney has done his best to dampen speculation about a rate hike in recent months, but with the UK economy continuing to improve, he was forced to change his stance this week. On Wednesday, Carney said that the central bank may have to raise interest rates in the second half of 2015 to keep inflation in check. The BOE sharply revised its growth forecast for 2014 to 3.4%, up from 2.8%, and added that inflation, which has fallen faster than expected, should remain close to the 2% target. The positive news was just the tonic the pound needed, and the currency responded by jumping about 150 points against the dollar on Wednesday.
Federal Reserve chair Janet Yellen didn’t generate much excitement in the markets when she testified before Congress earlier this week. She said that the Fed plans to continue trimming QE, provided that the employment picture continues to improve and inflation rises. She acknowledged that even though the unemployment rate has improved steadily, the recovery in the labor market is far from complete and the Fed plans to keep interest rates at ultra-low levels. Yellen, who took over as Fed chair on February 1, is expected to continue the policies of her predecessor, Bernard Bernanke.
With the US economy pointed in the right direction, the Federal Reserve has implemented two tapers of $10 billion to the QE scheme, reducing QE to $65 billion each month. We could see another taper when the Fed meets in March. Former Fed chair Bernard Bernanke took his time making the decision, and the taper train will be hard to stop, barring any unexpected downturns in the economy. The Fed plans to continue winding down QE in $10 billion installments, completing the process by the end of 2014.
GBP/USD for Friday, February 14, 2014
GBP/USD February 14 at 11:55 GMT
GBP/USD 1.6708 H: 1.6715 L: 1.6645
- GBP/USD continues to post gains in Friday trading. The pound pushed above the 1.67 line earlier in the European session.
- On the downside, 1.6705 is under strong pressure. There is stronger support at 1.6549.
- 1.6896 is the next resistance line. Next is resistance at 1.6964, protecting the key 1.70 level.
- Current range: 1.6705 to 1.6896.
Further levels in both directions:
- Below: 1.6705, 1.6549, 1.6416, 1.6329 and 1.6231
- Above: 1.6896, 1.6964, 1.7087 and 1.7192
OANDA’s Open Positions Ratio
GBP/USD ratio is showing little change on Friday. This not consistent with the pair’s current movement, as the pound continues to push upwards. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar recovering from its sharp slide.
The pound continues to make inroads against the retreating US dollar on Friday. In the European session, the dollar remains under pressure.
- 13:30 US Import Prices. Estimate -0.1%.
- 14:15 US Capacity Utilization Rate. Estimate. 79.4%.
- 14:15 US Industrial Production. Estimate 0.2%.
- 14:55 US Preliminary UoM Consumer Sentiment. Estimate 80.6 points.
- 14:55 US Preliminary UoM Inflation Expectations.
*Key releases are highlighted in bold
*All release times are GMT
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