The British pound is showing little change as the markets await key UK employment and Bank of England releases on Wednesday. The US markets are back in action after a holiday on Monday, and the sole release, NAHB Housing Market Index, beat the market estimate. There are no UK releases on Tuesday.
The markets are keeping a close eye on Wednesday’s UK releases. Claimant Count Change has posted back-to-back declines, and another strong reading could give the struggling pound a badly-needed boost. The Unemployment Rate is expected to remain at its current level of 7.7%. The BOE will release its MPC Meeting Minutes, and analysts will be examining the breakdown of the voting pattern by the nine members with regard to the interest rate and asset purchase decisions. Any unexpected reading could be a market-mover for GBP/USD.
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. Weale’s comments came after BOE Governor Mervyn stated that the UK faced a muted economic recovery. The markets remain concerned about the British economy, amid fears 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 Tuesday, Feb 19, 2013
GBP/USD Feb 19 at 13:00 GMT
1.5480 H: 1.5505 L: 1.5438
The pound is testing resistance at 1.5481. This is followed by resistance at 1.5565. On the downside, 1.5395 is the next line of support. This line has not been tested since June 2012.
- Current range: 1.5395 to 1.5481.
Further levels in both directions:
- Below: 1.5395, 1.5309, 1.5203, 1.5180 and 1.5053.
- Above: 1.5481, 1.5565, 1.5685, 1.5792 and 1.5854.
OANDA Open Positions Ratios
The GBP/USD ratio is not showing any movement. This is in line with what we are seeing from the currency pair, as GBP/USD trades quietly in the high 1.54 range. The ratio is overwhelmingly tilted in favor of long positions, so trader sentiment is clearly biased towards an upward correction by the pair.
The pound has been struggling of late, and is trying to stay close to the 1.55 line. With key releases on Wednesday from both the UK and US, we could see some strong movement from the pair, if the readings are out of line with market expectations.
- 15:00 US NAHB Housing Index. Estimate 46 points. Actual 48 points.
*Key releases are highlighted in bold
*All release times are GMT
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