By Kenny Fisher
GBP/USD is trading quietly at the start of the week, continuing the trend we saw for most of last week. Early in the North American session, the pair is trading slightly above the 1.70 line. On the release front, the BOE released its quarterly BOE Credit Conditions Survey. In the U.S., Existing Home Sales posted strong gains in May and climbed to a six-month high. There was further good news as Flash Manufacturing PMI moved higher last month and beat the estimate.
The British pound continues to enjoy the view above the key 1.70 level, where it has been perched since late last week. The currency is trading close to 5-1/2 year highs against the dollar, as speculation continues to swirl about a rate hike by the Bank of England before the end of the year. The pound jumped earlier in June when BOE Governor Mark Carney was unusually candid and said that the Bank could raise rates earlier than expected by the markets. With the UK economy looking strong, Carney and his colleagues at the BOE will be under the microscope as the markets look for hints about the timing of a rate hike, which would likely give a boost to the high-flying pound.
There was positive economic news out of the US on Thursday, as Unemployment Claims dipped to 312,000 last week, beating the estimate of 316,000. As well, the Philly Fed Manufacturing Index, which has been on the upswing for most of 2014, continued the trend and improved to 17.8 points, crushing the estimate of 14.3. This was the index's strongest reading since last August, and points to a manufacturing sector which is expanding in order to keep up with increasing demand.
On Wednesday, the Federal Reserve continued to taper its QE program, reducing the scheme by $10 billion, to $35 billion/month. If all goes as planned, the Fed could wind up QE in the fall. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won't see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as "steady as she goes." The perception that US interest rates will remain at ultra-low levels has weighed on the US dollar this week.
GBP/USD for Monday, June 23, 2014
GBP/USD June 23 at 14:40 GMT
GBP/USD 1.7015 H: 1.7049 L: 1.7002
- GBP/USD moved higher in the Asian session but surrendered these gains in European trading. The pair is unchanged in the North American session.
- 1.7183 is a strong resistance line. It has held firm since October 2008.
- The key line of 1.70 is an immediate support level. 1.692o is stronger.
- Current range: 1.7000 to 1.7183.
Further levels in both directions:
- Below: 1.7000, 1.6920, 1.6825 and 1.6700
- Above: 1.7183, 1.7228, 1.7383 and 1.7482
OANDA's Open Positions Ratio
GBP/USD is pointing to gains in long positions on Monday. This is not consistent with what we are seeing from the pair, as the pound continues to show little movement. A significant majority of open positions in the GBP/USD ratio are short, indicative of a trader bias toward the dollar moving higher.
- 8:30 BOE Credit Conditions Survey.
- 13:45 US Flash Manufacturing PMI. Estimate 56.1 points. Actual 57.5 points.
- 14:00 US Existing Home Sales. Estimate 4.74M. Actual 4.89M.
*Key releases are highlighted in bold
*All release times are GMT