Sterling Remains Buoyed Following Broadbent Comments on Inflation

Sterling moved higher in response to remarks from The Bank of England’s MPC member Broadbent, who prompted market participants to re-consider what he appeared to imply were overly dovish interpretations of the BoE’s November Inflation Report. Broadbent said that “you should push them too far” with regard to the “inferences” of the central bank’s forecast on the market yield curve.

Markets had been focusing on the Inflation Report’s forecast that inflation wouldn’t breach target even if interest rates remained unchanged throughout 2016. Cable lifted to a peak of 1.5249, having traded at 1.5201 bid before Broadbent’s comments hit the wires.

The pound should hold its own against the greenback, the BoE appears to be close to tightening and interest rate differentials should remain close the U.S. ahead of next month’s FOMC decision on interest rates.

GBP/USD edged higher and is poised to test downward sloping trend line resistance that connects the highs in August to the highs in October and comes in near 1.54. Support is seen near the 10-day moving average at 1.5182, and then a horizontal trend line at the lows of November near 1.5026. Momentum is non-existent, with the MACD printing near the zero index level, with a flat trajectory. The RSI (relative strength index) is printing a reading of 45, which is in the middle of the neutral range reflecting consolidation.

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