The British pound has leveled off after Friday’s losses, but still remains under pressure as it trades in the low-1.49 range. In the Monday’s European session, the pound touched a low of 1.4866, its lowest level since June 2010. The pound has since edged upwards, and is back above the 1.49 line. On Friday, the pound lost over a cent as US employment numbers were much better than expected. There are no releases out of the US or the UK on Monday, but the markets will be keeping a close eye on British Manufacturing Production, which wil lbe released on Tuesday.
On Thursday, the Bank of England voted to maintained interest rates as well as Asset Level purchases. The decision to keep rates at 0.50% was widely expected, but there was some talk of an increased QE, as some BOE members, including Governor King, had spoken in favor of increasing asset purchases in order to aid the struggling UK economy. In the end, the BOE voted to maintain QE at the present level of 375 billion pounds Across the Channel, ECB policymakers also voted to maintain the benchmark interest rate, at 0.75%. Although the markets expected the rate to remain steady, and ECB head Mario Draghi didn’t have anything new to share at the ECB press conference, the markets were pleased, and the euro took advantage, gaining a cent against the dollar. Draghi once again reminded us that, yes, the Eurozone economy is having a tough go of it, but things will improve later in the year. Draghi also reassured his listeners that the crisis in Italy would not spread, but did call on member countries to implement needed structural reforms, in what could be seen as a hint to Italy to continue with its austerity measures in order to get its economy headed in the right directions. The ECB’s decision to maintain rates was not unanimous, as some policymakers wanted to lower rates. Given the lackluster performance of the Eurozone, with the notable exception of Germany, the ECB could well step in and lower rates if the Eurozone economy fails to turn around.
US employment numbers sizzled last week, and the dollar took full advantage as it pummeled the struggling British currency. Unemployment Claims dropped to 340K, well below the estimate of 354K. Non-Farm Employment Claims hit 236 thousand, easily exceeding the forecast of 162 thousand. The Unemployment rate fell, dropping to 7.7% from 7.9%. The strong data has raised speculation that the Fed might wind up its current round of QE, which involves the purchase of $85 billion in assets each month. Previously, the Fed has said that the open-ended asset purchases would continue until unemployment fell to 6.5%. However, if the economy continues to show signs of improvement, the Fed will face pressure to wind up or at least modify the current asset purchase program.
GBP/USD for Monday, March 11, 2013
1.4898 H: 1.4944 L: 1.4866
The pound continues to slump, and has is struggling to stay above the 1.49 line. The pair is facing resistance at 1.4988. This is followed by resistance at 1.5053. On the downside, there is weak support at 1.4880. Given the current downward trend, this line could face pressure from the pair. The next support level is at 1.4818.
- Current range: 1.4880 to 1.4988
Further levels in both directions:
- Below: 1.4880, 1.4818, 1.4766 and 1.4618.
- Above: 1.4988, 1.5053, 1.5138, 1.5203 and 1.5309
OANDA Open Positions Ratios
The GBP/USD ratio is showing movement towards short positions. The pair has shown some volatility on Monday, and did lose ground earlier, but has since recovered. With the pair continuing to fluctuate, we can expect the ratio to continue to be active as well.
The pound continues to struggle against the US dollar. The British currency now finds itself in unfamiliar territory, as it trades around the 1.49 level. Will the downward spiral continue? With no releases out of the US or the UK on Monday, we can expect the pair to hover close to the 1.49 line. We could see some volatility on Tuesday, as there are a host of UK releases highlighted by Manufacturing Production.
- There are no releases out of the US or the UK or Monday.
*Key releases are highlighted in bold
*All release times are GMT
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