Sterling Rebounds as Market Looks Forward to Jobs Data

Posted On 20 Jan 2015
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Sterling has rebounded over one big figure climbing above 1.5160, after dipping to an eight day lows at 1.5055 as market participants seem to be focusing on tomorrow’s UK labor market data, which is expected to see both the claimant count rate and unemployment fall to new cycle lows, to 5.9% from 6.0% in the case of the latter.

It seems that Bank of England Monetary Policy Committee members’ efforts to downplay the dive in UK December CPI to 0.5% year over year, has markets pushing back expectations for a BoE rate hike to Q1 2016 from mid-2015. There is even speculation that the BoE could even implement fresh QE should Eurozone economic stagnation continue to erode the UK economy, which is presently being underpinned by consumer spending, but undermined by weak exports, slack business investment and falling government spending.

The minutes to the January BoE MPC meeting should see the vote to leave the repo rate at 0.5% was 7-2 with McCafferty and Weale continuing their dissent in favor of a 25 basis points hike for a sixth consecutive month. Governor Carney last week somewhat downplayed the drop in December CPI to 0.5%, though the minutes should show that the majority of the members remain on a dovish.

Europe will continue to take center stage following last week’s remarkable breach of the Swiss National Bank’s bulwark against franc appreciation, which collapsed after the SNB let the EUR/CHF cap go. Looking ahead, in addition to the clean-up of the Swiss mess, focus will shift to the next round of risk events, including the much heralded ECB meeting, along with Greek elections and even an FOMC meeting due before month-end.

The GBP/USD continues to trade in a tight range as the market awaits the ECB. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs while the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. Additionally, the RSI moved higher with price action reflecting accelerating positive momentum.

The post Sterling Rebounds as Market Looks Forward to Jobs Data appeared first on Forex Circles.

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