Sterling Pauses Following Robust 4-Big Figure Rally

Posted On 20 Apr 2015

Tag: GBP

Sterling consolidated after a robust rally last week, having seen cable increase by more than 4 big figures against the greenback. Resistance is seen near Friday’s high at 1.5050. BoE Governor Carney warned of a risk of a sharp reversal in the financial markets when policy changes. Later this week traders will need to absorb the contents of the BoE policy minutes.

BoE Governor Carney warned that the risk of a “sharp and disorderly reversal” in financial markets remains due to the compressed credit and liquidity risk premium. As the year winds on and data continues to reflect a solid economic backdrop, it is clear that the central bank want to His remarks were made at the weekend’s IMF and World Bank meetings in Washington DC. He acknowledged that the world has adjusted well to divergent growth and monetary policy expectations but that market participants should be mindful of the risk of diminished market liquidity, asset price discontinuities, and contagion across markets.

He said that, the impact of lower commodity prices, a stronger U.S. dollar and moderating economic growth may lead to further challenges for the financial resilience of some emerging market and developing economies, including the risk of capital flow volatility.

Looking forward market participants will need to absorb the minutes to April BoE MPC policy meeting this week on Wednesday. Analysts expect the Committee will vote 9-0 to maintain the repo rate at 0.5%, where it’s been since March 2009, and the QE total at GBP 375 billion. The minutes should also convey a repetition of the central message from recent BoE communications that the next monetary policy move would likely be a repo rate hike but not until Q1 2016.

As for the data, the release of ONS stats office March retail sales data should show a 0.4% month over month and 5.4% year rise. Risks are to the upside following a very strong BRC retail figure. Trending improvement in the labor market and rising real wages are supporting consumer spending.

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