Article by ForexTime

GBP has been trading with a heavy bias in the wake of weak U.K. data, and ahead of the US FOMC announcement.  Expectations for the FOMC meeting are that there will be little change and that the committee will move forward and end the current bond purchase program.  The rally in US stocks has allowed yields to move higher, pushing the yield differential in favor of the greenback.

In the UK, Mortgage approvals dipped by a more than expected to 61.3k in official BoE data for September, below median expectations for 62.9k tally and down from 64.1k in August, and the lowest level of approvals in over a year. Mortgage lending also dropped, to 1.9 billion from 2.2. billion and consumer credit declined to 0.9 billion from 1.0 billion. Lending to businesses dipped 710 million, and is down by 3.1% year over year.

Although there had been some concerns, investors have come around and expect the Federal Reserve to announce its commitment to end quantitative easing.  The statement will likely reflect that the centrist core remains in control, and has a dovish slant.  The statement will likely continue to contain the phrases “significant under-utilization” of the labor market, the “considerable” period between the end of QE and the first hike, and that the Fed funds rate may remain below what is regard as the long-term equilibrium level.

Technicallly, the GBP/USD has recaptured short-term support near the 10-day moving average at 1.61.  Resistance on the currency pair is seen near 1.6180.  Momentum is positive as the MACD (moving average convergence divergence) index printing in positive territory with an upward sloping trajectory.  After declining by nearly 8% from the highs in July to the low in October, the currency pair could bounce and the first Fibonacci retracement level would be 1.65.

Article by ForexTime

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