By Kenny Fisher
GBP/USD is showing some weakness on Tuesday, as the pair has dipped below the key 1.70 line. On the release front, BOE Governor Mark Carney said that any rise in hikes would be a gradual process. BBA Mortgage Approvals continued to lose ground, dropping for a fourth consecutive month. Over in the US, New Home Sales and CB Consumer Confidence jumped to multi-year highs.
BOE Governor testified before a parliamentary committee on Tuesday, and said that any rise in interest rates would be "limited and gradual". Carney seemed to backtrack from unusually candid remarks earlier in June, when he said that the Bank could raise rates earlier than expected by the markets, which led to the pound soaring higher in response. With the UK economy looking strong, Carney and his colleagues at the BOE will be continue to be under the microscope, as the markets looks for hints about the timing of a rate hike, which could take place before the end of 2014.
US numbers sparkled on Tuesday, as housing and consumer confidence numbers pointed higher. New Home Sales jumped to 504 thousand, crushing the estimate of 442 thousand. It was the key indicator's best showing since August 2008. CB Consumer Confidence followed suit, improving to 85.2 points, beating the estimate of 83.6 points. It was the strongest level since December 2007. The strong numbers helped the US dollar post some gains against the British pound, but GBP/USD has still jumped about 200 points since the start of June.
Last week, the Federal Reserve continued to taper to 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 Tuesday, June 24, 2014
GBP/USD June 24 at 15:40 GMT
GBP/USD 1.6970 H: 1.7032 L: 1.6967
- GBP/USD was stable in the Asian session but posted losses and dropped below the 1.70 line early in European trading. The pair has lost ground in the North American session, as the US dollar remains under pressure.
- 1.6970 is the next support level. There is stronger support at 1.6825.
- The key line of 1.70 was breached earlier and has switched back to a resistance role. 1.7183 is stronger.
- Current range: 1.6920 to 1.700.
Further levels in both directions:
- Below: 1.6920, 1.6825, 1.6700 and 1.6624
- Above: 1.7000, 1.7183, 1.7228 and 1.7383
OANDA's Open Positions Ratio
GBP/USD is pointing to gains in long positions on Tuesday, continuing the direction seen a day earlier. This is not consistent with what we are seeing from the pair, as the pound has lost ground. A significant majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving higher.
- 14:00 US CB Consumer Confidence. Estimate 83.6 points. Actual 85.2 points.
- 14:00 US New Home Sales. Estimate 442K.
- 14:00 US Richmond Manufacturing Index. Estimate 6 points. Actual 3 points.
- 14:00 US Treasury Secretary Jack Lew Speaks.
*Key releases are highlighted in bold
*All release times are GMT
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.