Article by ForexTime
Cable briefly traded below the 200-day moving average at 1.6664 in logging a four-month low at 1.6657, since recovering above 1.6680. This is the first time sterling has ventured below the 200-day average since September 2013. Momentum on the currency pair is negative but the RSI (relative strength index) is printing a reading of 24, which is below the oversold trigger level of 30 and could foreshadow a correction.
The key for the currency pair will be at what point in the ensuing recovery we start to see wages pick up, which the BoE said in its Inflation Report Wednesday is the key metric being monitored with regard to the timing of a rate hike. BoE MPC member Miles spoke of the slack in the economy during an interview on the Radio. He said that while U.K. growth remains good and that the recovery is not stagnating, the degree of slack in the economy means that interest rates can stay low, which repeats the main takeaway message of the Inflation Report. He also said that wage growth, which posted the first decline in five years in data out yesterday, would return to +2.0% soon.
The RICS housing index came in weaker than expected at 49%. UK yields continue to decline, now at levels not seen since August 2013, with the 10-year yields at 2.40%. Recent softness in the UK data coupled with a dovish BOE inflation report continues to weight on sterling.
In other European news, German Q2 GDP contracted -0.2% quarter over quarter, weaker than consensus expectations for a 0.1% quarter over quarter decline. At the same time, Q1 GDP was revised down to 0.7% quarter over quarter from 0.8% quarter over quarter reported initially. There is no breakdown with the preliminary numbers, but part of the weakness is due to calendar effects, which boosted Q1 and means that the first half of the year needs to be seen as a whole. Still, with confidence indicators also heading south and concerns rising that the trade war with Russia will derail the German recovery, forecasts for the whole year now look optimistic and downward revisions will add to pressure on the ECB to do more to support growth.
Article by ForexTime
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