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GBP/USD: Pound Climbs on British CPI, Yellen Remarks

GBP/USD has posted gains on Tuesday, as the pair trades in the mid-1.71 range in the North American session. The pound climbed as high as 1.7192, its highest level in over five years. British CPI jumped to 1.9%, a five-month high. BOE Governor Mark Carney testified before a parliamentary committee in London. In the US, retail sales numbers were a mix, and Janet Yellen is testifying before the Senate Banking Committee. As well, the Empire State Manufacturing Index posted strong gains in June.

British CPI caught the markets by surprise, as the key index jumped to 1.9%, its highest level since January. The rise in inflation has increased speculation about a rate hike by the BOE. However, BOE Governor Mark Carney, testifying before the House of Commons Treasury Committee, said that the central bank would not provide forward guidance as to when the Bank would raise interest rates. Carney added that a decision to raise rates will be driven by market data. So, it appears that market speculation as to when the BOE might make a rate move will only increase as the BOE is intent on keeping the markets in the dark until such time that a rate hike is announced.

In the US, retail sales releases, the primary indicators of consumer spending, marked the first key events of the week. Retail Sales slipped to 0.2%, well off the estimate of 0.6%. There was better news from Core Retail Sales, which excludes the most volatile items included in Retail Sales. The indicator improved to 0.4%, a three-month high. This was just shy of the estimate of 0.5%. There was excellent news from the manufacturing sector, as the Empire State Manufacturing Index jumped to 25.6 points, its third straight rise.

Testifying before the Senate Banking Committee, Fed chair Janet Yellen said that although the US economy was improving, further monetary easing was needed, as inflation and  employment levels remain below the Fed’s goal. Yellen has not provided any clues as to when interest rates will rise, but such a move is widely expected once the QE scheme winds up, perhaps in early 2015. The asset purchase program flooded the economy with over $2 trillion, and the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.


GBP/USD for Tuesday, July 15, 2014

GBP/USD July 15 at 15:30 GMT

GBP/USD 1.7160 H: 1.7193 L: 1.7150


GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6825 1.6920 1.7000 1.7183 1.7228 1.7383


Further levels in both directions:


OANDA’s Open Positions Ratio

GBP/USD is pointing to gains in short positions in Tuesday trade. This is not consistent with the movement of the pair, as the pound has posted strong gains. A substantial majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing directions and moving higher.


GBP/USD Fundamentals

* Key releases are highlighted in bold

*All release times are GMT




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.

Kenny Fisher

Kenny Fisher [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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