GBP/USD – Higher after BOE Minutes Release

The pound continues to push upwards against the dollar, as GBP/USD is testing the 1.63 line. The pair has gained about two cents in the past week, as the pound has made the most of broad dollar weakness. Will the rally continue? The pound received a boost from Wednesday’s release of the BOE Meeting Minutes, which indicated that in its December meeting, the monetary policy committee voted 8-1 to maintain QE levels at 375 billion pounds, with the lone dissenter favoring additional monetary easing.

The vote to maintain interest rates at 0.50% was unanimously accepted by all nine members. On the fundamental side, a lot of UK inflation data released on Tuesday, most of which was within the market expectations. On Wednesday, GBP/USD shrugged off a disappointing release of CBI Realized Sales. The indicator plummeted last month, dropping to 19 points, which was well off the estimate of 26 points. In the US, today’s highlight is Building Permits.
In Washington, negotiations over the approaching fiscal cliff continue at an intensive pace between the Democrats and Republicans. Although there have not been any dramatic breakthroughs to report, the markets are cautiously optimistic that lawmakers on Capitol Hill will reach an agreement shortly.

Polls indicate that most Americans blame the Republicans for the impasse and failure to resolve the crisis. The Republicans have responded by softening their positions and rhetoric, and are sounding more conciliatory. They have reluctantly agreed to tax hikes on the highest income earners, but the Democrats want these hikes to cover those earning more than $400,000 (previously $250,000). Other significant gaps remain between the two sides, especially with regard to the extent of spending cuts to Federal programs.

With Q4 behind us, the markets are closely monitoring the progress in the talks, and we could see more movement by the pair, with the direction depending on the news out of Capitol Hill. Any positive developments would likely be dollar negative and help the pound.

GBP/USD for Tue, Dec 18, 2012

GBP/USD Dec 18 at 12:25 GMT
1.6294 H: 1.6306 L: 1.6254

GBP/USD Technical
GBP/USD broke through resistance at 1.6212 yesterday (Dec. 18), and is currently testing the next resistance line at the round number of 1.63. On the downside, 1.6212 has strengthened in support as the pair moves higher.
• Current range: 1.6212 to 1.63
Further levels in both directions:
• Below: 1.6212, 1.6135, 1.6020, 1.5975, 1.5940, 1.5825 and 1.5775.
• Above: 1.63, 1.6341, 1.6475 and 1.66.

OANDA Open Positions Ratios
The pound continues to make inroads against the dollar, and is now testing the 1.63 line. With the ratio biased toward long positions, trader sentiment continues to point to a retraction by GBP/USD to lower levels. However, there is no sign of a downturn as this week’s movement continues to be upward.

The pound continues to take advantage of broad dollar weakness, and shrugged off a weak sales indicator earlier on Wednesday. The trend remains upward, so we could the pound post further gains in today’s North American session.

GBP/USD Fundamentals
• 9:30 MPC Meeting Minutes.
• 9:30 CBI Realized Sales.
• 13:30 US Building Permits. Estimate 0.88M.
• 13:30 US Housing Starts. Estimate 0.87M.
• 15:30 US Crude Oil Inventories. Estimate -0.9M.

*Key releases are highlighted in bold
*All release times are GMT

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