GBP/USD has edged lower on Wednesday, as the pair trades in the mid-1.69 range in the North American session. The pair briefly moved above the 1.70 early in the day but was unable to consolidate at these levels. On the release front, the BOE minutes indicated that the interest rate and QE decisions were unanimous. Two MPC members will speak during the day, and the markets will be listening for any mention of the BOE minutes. In the US, Current Account disappointed, as the deficit shot higher in May. Today’s highlight is the Federal Reserve policy statement and follow-up press conference.
The Federal Reserve is in the spotlight on Wednesday, as the US central bank will release a policy statement later in the day. The Fed is expected to trim its QE program by another $10 billion, which would reduce the asset purchase scheme to $35 billion/month. The big question is when the Fed will raise interest rates, but Fed chair Janet Yellen is unlikely to shed much light on that issue. If, as expected, QE is wound up in 2014, we could see a rate hike in the first half of 2015. However, cuts to QE are dependent on the health of the US economy, which continues to move in the right direction, despite some bumps in the road.
The BOE opted to hold the course with regard to the benchmark interest rate and the asset purchase program, and as expected, the minutes showed that these decisions were both unanimous (9-0). The BOE kept interest rates at 0.50%, and QE at 375 billion pounds. There has been much speculation about when the BOE might raise rates, and Governor Mark Carney singlehandedly caused a run on the pound last week, after stating that a rate increase could occur earlier than expected by the markets. Had the rate decision not been unanimous, we could have seen the high-flying pound move even higher.
It’s become a familiar story in the UK, as CPI, the primary gauge of consumer inflation, lost ground as it posted a gain of 1.5%. This was short of the estimate of 1.7%, and the index’s lowest gain since September 2009. Perhaps more worrying is the fact that with the exception of the April reading, CPI has posted smaller gains every month since last September. The lower inflation levels will be welcome news for the Bank of England, since it means less pressure on the Bank to raise interest rates. However, with the economic recovery deepening, there is growing sentiment that the BOE could hike rates sometime this year.
GBP/USD for Wednesday, June 18, 2014
GBP/USD June 18 at 15:35 GMT
GBP/USD 1.6946 H: 1.7003 L: 1.6932
- GBP/USD has edged lower on Wednesday.
- On the upside, 1.70 is the next line of resistance. The pair broke through early in the European session but has since retracted. 1.7183 is stronger.
- 1.6920 is a weak support line. Will the pair break through this barrier? 1.6825 is a stronger support level.
- Current range: 1.6920 to 1.7000.
Further levels in both directions:
- Below: 1.6920, 1.6825, 1.6700 and 16605
- Above: 1.70, 1.7183, 1.7228 and 1.7383
OANDA’s Open Positions Ratio
GBP/USD is pointing to gains in long positions on Wednesday, reversing the trend we have seen since the start of the week. This is not consistent with the movement of the pair, as the pound has posted slight losses. A significant majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving higher.
GBP/USD has posted slight losses on Wednesday, despite breaking above the 1.70 line earlier in the day. The pair is unchanged in the North American session.
- 8:30 MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9.
- 8:30 MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9.
- 11:15 External BOE MPC Member Martin Weale Speaks.
- 12:30 US Current Account. Estimate -96B. Actual -111B.
- 14:30 US Crude Oil Inventories. Estimate -0.6M. Actual -0.6M.
- 18:00 US FOMC Economic Projections.
- 18:00 US FOMC Statement.
- 18:00 US Federal Fund Rate. Estimate <0.25%.
- 18:30 US FOMC Press Conference.
- 17:30 BOE Chief Economist Andy Haldane Speaks.
*Key releases are highlighted in bold
*All release times are GMT