Sound As A Pound?
Today’s Spotlight Market
The British Pound has suffered heavy losses since July, but prices seemed to have been stabilizing in recent sessions.? Traders have viewed the decline in exchange rate as excessive, which has squeezed some shorts out of the market.? The UK has suffered some of the same issues that the EU has, but growth continues to outpace that of continental Europe. Technically, the chart is showing signs that the Pound could be bottoming in the near-term and may be set to rebound in coming sessions.
Fundamentals
Economic growth in the UK did slide back a bit this quarter, with the quarterly GDP slowing from 0.9% to 0.7% in Q3.? However, GDP is on pace to grow at a rate of 3.0%, year over year, which is still a very respectable number and better than the Eurozone.? For this reason, the Bank of England could be a bit more conservative in its policy compared to the ECB.? The slowing pace of growth, however, is disappointing but not surprising.? Recent economic indicators have been pointing a bit downward and UK workers? wages have been on the decline.? The wage decline is one of the largest threats to the recovery going forward and should be monitored just as closely as the unemployment rate, if not more so. ?
Technical Notes -? View Today’s Chart
Turning to the chart, we see the December British Pound appearing to form an inverted head and shoulders pattern.? If the pattern is confirmed, the Pound may test the 1.6500 level.? The close above the 20-day moving average suggests that a near-term low may be in place.? The recent activity has resulted in the RSI recovering to neutral territory from oversold levels.
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