GBP/USD: bulls need to break 1.4025, (soft Brexit and hawkish BoE bias)
- GBP/USD: BoE outlook, soft Brexit bias sterling supportive.
- GBP/USD: 1.4005/25 a tough area of resistance.
GBP/USD is currently trading at 1.3989, starting the week on the front foot and lifted by weekend comments from a hawkish dep. BoE gov. Ramsden. Offers on the 1.4000 handle are clustered between 1.4005 and last Tuesday's high of 1.4025. Higher rate sentiment is trumping ongoing Brexit uncertainties.
(Note: massive 1.4000 option expiry Monday, GBP 2.15bln).
Friday's market was choppy on the 1.39 handle with bulls attempting to break through offers on the 1.40 handle, recovering early doors in NY from the fat finger flash crash that took the currency down from the 1.3980 regions to 1.3904. That mess was cleaned up soon enough, making for a spike and follow through to break the previous session highs at 1.4006. GBP/USD was closing at 1.3960 on a strong rejection, (US Federal Reserve’s semi-annual monetary policy report revealed little new and US 10yr treasury yields fell from 2.93% to 2.86%).
BoE Deputy Governor, Dave Ramsden, turns hawkish
Over the weekend, Bank of England Deputy Governor Dave Ramsden was coming with hawkish rhetoric in an interview where the Sunday Times newspaper reported him changing his outlook for rates, switching from a dove to a hawk when saying "I see the case for rates rising somewhat sooner rather than somewhat later," after previously voting against the Nov rate hike in 2017.
The focus for the week ahead will likely be on a semi-annual congressional testimony by Fed chairman Powell while Brexit will be back on the agenda when PM May speaks on March 2 - (markets will be looking for a soft Brexit bias from the UK government that will be sterling bullish).
GBP/USD levels
Valeria Bednarik, chief analyst at FXStreet explained that the daily chart shows that it ended the week around the 38.2% retracement of its February slump, and a handful of pips below a bearish 20 SMA:
"Technical indicators turned higher around their mid-lines, supporting some additional gains on a break above 1.4020, the next Fibonacci resistance. Shorter term, and according to the 4 hours chart, the pair presents a neutral stance, holding a few pips above a marginally bearish 20 SMA, while technical indicators hold directionless around their mid-lines".