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Sterling Gains Footing Following BoE Decision
Sterling has found its feet after dropping quite sharply against both the dollar and euro Wednesday. Cable has recouped above 1.5400 after logging a one-month low at 1.5330. Weak May manufacturing output data this week show that the UK economy is particularly sensitive to the strength of the pound, which is near multi-year highs in trade-weighted terms. The BoE chief economist Haldane recently presented sterling strength as a dovish argument, while Governor Carney also said recently that low interest rates could persist for quite some time.
The BoE left monetary policy unchanged, as was widely anticipated. This is a non-event for markets as the central bank didn’t issue a statement, as per normal after unchanged decisions. The minutes will be published on July 22, 2015.
The U.K.’s RICS house price balance increased more than expected in June. RICS reported that U.K. housing price balance rose to 40%, from 34% in May. Analysts had expected U.K. RICS house price balance to rise to 37% last month.
The GBP/USD will likely test support near an upward sloping trend line that connects the lows in May to the lows in June and comes in near 1.5210. Resistance is seen near the 10-day moving average at 1.5745. Momentum remains negative with the MACD (moving average convergence divergence) index printing in the red with a downward sloping trajectory. The RSI is printing near 45, reflecting a consolidative tone.
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