Article by ForexTime
The GBP/USD is higher on BoE’s Carney remarks, which has allowed sterling to recover above 1.6700. Governor Carney said that the U.K. recovery is more than half way through and that he would not wait to see real wages turn positive before hiking interest rates. News, meanwhile, that the Rightmove house price index came in below expectations in August, which is the latest sign that the housing market is slowing following a surge over the last year, didn’t have much impact.
Governor sounded hawkish in weekend remarks made in an interview with the Sunday Times, saying “we don’t have to wait” for real wages to turn positive before hiking interest rates, though he also said that “we have to have the confidence that prospective real wages are going to be growing sustainably”. He also said that there are “big pockets” of households “who will be very sensitive to interest-rate increases when they begin, so it makes sense to be gradual.” He said that banks have made “substantial progress” in returning to normal. Regarding the recovery he said, “the expansion is proceeding, momentum is more assured,” and “the very fact we have had consistent quarters of growth in line with, or slightly better than, our forecasts shows that”. “Wherever the finish line was in the depths of the crisis, we are much more than halfway toward that finish line now.”
Also on Monday, the U.K.’s Rightmove house price index came in below expectations at -2.9% m/m, which is the latest sign that the housing market is slowing following a surge over the last year. The decline in mortgage approvals over the last six months has portended the drop off in house prices that we are now seeing. This reflects the rising odds of a BoE interest rate hike, high property prices, and the impact of the Mortgage Market Review in April, which has pushed up mortgage lending rates. The BoE also used new powers to cap on loan-to-income ratios in June.
The GBP/USD for the momentum has held support near the 200-day moving average at 1.666. Resistance has also held near the 10-day moving average at 1.6770. The RSI (relative strength index) which is a momentum oscillator that measures overbought and oversold levels, has turned positive and is printing near 32, after coming from oversold levels near 25. Momentum as reflected by the MACD (moving average convergence divergence) index is still negative.
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