Will The Pound Sterling Shine Bright In 2014?
Today’s Spotlight Market
Although the British Pound has strengthened vs. the U.S. Dollar the past 12 months, the rally in the Pound Sterling still has its roadblocks. On Thursday, first quarter GDP readings came in at +0.8%, which was unchanged from the initial forecast. This disappointed traders who were expecting a gain of 0.9. In addition, net-borrowing in April rose to 11.5 billion pounds, up from 9.5 billion pounds in April 2013. So while the uptrend is still intact, Pound bulls may become nervous and a correction is possible, unless the market continues to receive ?positive? economic news on the U.K. economy.
Fundamentals
Are ?hawks? starting to hatch at the Bank of England (BOE)? That is a question currency traders are beginning to ask, as the value of the British Pound is continuing to increase versus the U.S. Dollar. It appears that the UK economy is recovering faster than its European neighbors, with the BOE raising its Q2 growth forecast to 0.9% from 0.8% in Q1. This growth forecast received a boost from a larger than expected rise in retail sales in April, a 1.3% gain for the month, which was well above expectations of a 0.4% gain.
Recently released minutes from the last BOE monetary policy meeting showed some members of the Monetary Policy Committee believe that interest rates may need to rise, but at a very gradual rate. This view has sparked talk that the BOE will begin to raise rates earlier than the market expected, which was for a start sometime in the first quarter of 2015. Committee members expect U.K. inflation to rise closer to 2% in the coming months, although a stronger Pound may help to dampen rising inflationary concerns. UK property values continue to rise sharply, which may force the BOE to take action to help ?cool? the red-hot property market. ?
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for British Pound futures, we notice prices steadily climbing the past 12 month, although recent price action seems to be testing the uptrend line drawn from the July 2013 lows. Trading volume has been light the past several weeks, as it appears that fresh buying is not materializing in any meaningful way. The 14-day RSI has turned neutral, with a current reading of 53.95. 1.6992 is seen as the next resistance level for the Pound futures, with support found at 1.6727.
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