GBP/USD – Pound Gains Continue on Split BoE Rate Vote

GBP/USD has posted gains on Thursday, continuing the upward movement which marked the Wednesday session. In North American trade, the pair is trading at 1.2360. On the release front, the BoE maintained the benchmark lending rate at 0.25%. The vote was expected to be unanimous, but one MPC member voted in favor of raising rates by a quarter-point. In the US, Building Permits fell to 1.21 million, missing the estimate of 1.26 million. The Philly Fed Manufacturing Index dropped sharply to 32.8, above the forecast of 30.2 points. On the labor front, unemployment claims ticked down to 241 thousand, beating the forecast of 245 thousand. On Friday, the US will publish the UoM Consumer Sentiment report.

There was a surprise from the Bank of England on Thursday. The Monetary Policy Committee did not alter interest rates, which have been pegged at 0.25 percent since August 2016. However, one member of the MPC, Kristen Forbes, voted in favor of a 0.25% rate hike, while the other 8 members voted to maintain rates at their current level. This move helped boost the pound above 1.2350 for the first time since March 1. The markets had predicted that the vote in favor of maintaining the rate would be unanimous at 9-0. The BoE is likely to face more pressure to raise rates, as inflation continues to climb. The minutes acknowledged higher inflation levels, noting that inflation could exceed the 2% target by the summer, given the depreciation in the British pound.

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There were no raised eyebrows when the Federal Reserve raised rates by a quarter-point on Wednesday, as the markets had priced a rate hike at over 90%. The rate hike, the second in just three months, raised the raised the benchmark lending rate to a 0.75%-1% range. What was not expected, however, was the sharp drop of the dollar against its major rivals. The markets were hoping that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening. There was disappointment as Fed Chair Janet Yellen reiterated that further rate hikes would be done gradually, pushing the dollar on Wednesday. As well, the US dollar may have lost ground due to traders and investors acting on “buy on rumor, sell on fact”. This larges-scale selling of US dollars after the Fed hike has sent the US dollar broadly lower, with the pound gaining 1.7 percent since the Fed announcement.

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GBP/USD Fundamentals

Thursday (March 16)

• 8:00 MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 1-0-8
• 8:00 BoE Monetary Policy Summary
• 8:00 BoE Official Bank Rate. Estimate 0.25%. Actual 0.25%
• 8:00 BoE Asset Purchase Facility. Estimate 435B. Actual 435B
• 8:00 MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9
• 8:30 US Building Permits. Estimate 1.26M. Actual 1.21M
• 8:30 US Philly Fed Manufacturing Index. Estimate 30.2. Actual 32.8
• 8:30 US Unemployment Claims. Estimate 245K. Actual 241K
• 8:30 US Housing Starts. Estimate 1.26M. Actual 1.29M
• 10:00 US JOLTS Openings. Estimate 5.45M. Actual 5.63M
• 10:30 US Natural Gas Storage. Estimate -60B. Actual -53B

Upcoming Key Events

Friday (March 17)

• 8:00 BoE Quarterly Bulletin
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 97.1

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, March 16, 2017

GBP/USD March 16 at 11:20 EST

Open: 1.2281 High: 1.2372 Low: 1.2234 Close: 1.2356

GBP/USD Technical

• GBP/USD edged lower in the Asian and European sessions. The pair has posted strong gains in North American trade
• 1.2351 is a fluid line. Currently it providing weak support
• 1.2471 is the next resistance line

Further levels in both directions:

• Below: 1.2351, 1.2272, 1.2143 and 1.2033
• Above: 1.2471, 1.2571 and 1.2706
• Current range: 1.2351 to 1.2471

OANDA’s Open Positions Ratio

GBP/USD ratio showed gains in short positions after gains by GBP/USD on Wednesday. Currently, long positions have a majority (62%). This is indicative of trader bias towards GBP/USD continuing to climb higher.

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.