20 October, AtoZForex.com, Lagos – The pound started the week continuing its strength from the previous weeks after rising for a third week against the dollar. On a trade-weighted basis, the sterling strengthened from a five-month low reached on the 13th of October, having climbed 0.7 percent to 73.62 pence per euro. Marking, its first weekly advance since mid-September.
GBPUSD strengthens amidst mixed data
The sterling strengthened against most of its major counterparts last week, as data from the UK was mixed. On the one hand, the inflation rate turned negative, while on the other hand the jobless rate fell and wage growth accelerated less than economists forecast.
Upcoming data is to be released on Wednesday the 22nd of October, and forecast show that retail sales increased in September. A key day, in terms of fundamentals as the European Central Bank also meets, amidst the speculation of the institution’s eventual stimulus increase. On the other hand, the US market sentiment towards a rate hike this year has dipped. Now, markets are only pricing a 32 percent probability of the Federal Reserve to raise rates this year. A drop down from 64 percent, of just a month ago.
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The pound’s renewed strength has continued into the new week, considering the fundamentals on ground. The pound rallied against the euro and dollar, amidst speculation that the monetary policy in both areas are likely to remain loose for longer than markets, which was previously expected.
Valentin Marinov, head of the Group-of-10 currency research at Credit Agricole said: “The pound has emerged as what we call the poor man’s decoupling trade,”. “Investors turn to the pound when the other policy divergence trade — long U.S. dollar — stops working.”
Following, the Bank of England Governor, Mark Carney’s declaration that rates will be raised soon, another BOE official Kristin Forbes recently reiterated the case. Signalling that the next move in U.K. interest rates will be up and that it should happen “sooner rather than later.”
Nasir trade journal
GBPUSD Daily chart
As clarified above, the sterling has experienced renewed strength in recent weeks. Against the dollar, it looks set to continue its rally, as the price is about to break above the resistance of the 20 MVA on the weekly chart and the 14 MVA on the monthly chart. Having this said, it provides the prices more upside potential in the upcoming days.
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