Article by ForexTime
After unexpectedly tumbling to its lowest valuation since November 2013 (1.5951) on Friday, the Cable has attempted to recover some of its losses during the early stages of the week. The pair advanced as high as 1.6115 in the early hours of Tuesday morning but has since pulled back to trade around 1.6074 at the time of writing. This pullback occurred despite the Manufacturing and Industrial Production data failing to show the same correlation that inspired the GBPUSD downward acceleration last week, which was the Markit Manufacturing PMI missing expectations due to the economic problems in Europe resulting in reduced demand for UK manufacturing products.
Although the data we received this morning showing Manufacturing and Industrial Production largely meeting expectations should have calmed down fears EU economic problems are already having a detrimental impact on UK sector growth, GBP gains seem to be limited today. Perhaps this is due to UK Chancellor, George Osborne attracting media attention on Friday for his comments regarding the Eurozone’s economic problems being the greatest threat to the UK economy. Those comments transpired only a few days after investors clearly became flustered by being provided an insight towards how the EU economic problems could have a detrimental impact on the UK economy, and maybe weakened investor appetite towards the sterling.
In order for the bulls to be reignited, we might need suspicions to arise that a third member of the Monetary Policy Committee (MPC) has voted for a UK rate rise with the Bank of England (BoE) meeting taking place, or tomorrow’s FOMC minutes to weaken the Greenback (USD) momentum that has picked up further steam in recent weeks. We did notice Greenback profit taking against its counterparts on Monday due to suspicions that the FOMC Minutes are still unlikely to provide a timeframe for a first US rate rise, but if the release is more hawkish than expected, the GBPUSD should drop straight back below 1.60.
Written by Jameel Ahmad, Chief Market Analyst at FXTM.
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