Article by ForexTime

Sterling edged lower against the greenback back on Monday, as yield differentials began to take hold and favor the greenback.  With the Fed announcement Wednesday and the potential for a dovish slant after the first rate hike in 9-years, the currency pair could remain buoyed.

Last week’s big UK trade data miss coupled with the more dovish than anticipated tone of the BoE MPC minutes have taken some of the shine out of sterling. The latest Right-move house price data also showed at 1.1% month over month decline. Next prime UK focus will be November inflation data, due Tuesday, which should headline CPI lifting to 0.1% year over year form -0.1% which would still reaffirm a very benign price picture.

Despite an initially pop in the 2-year yield differential that helped drive sterling higher against the greenback following the surprise move by the ECB, the spread has moved back to 30 basis points in favor of the greenback which could drive the currency pair lower.

Cable clocked a three-week high of 1.5240 on Friday, which exactly matched the prevailing position of the 50-day moving average. Support on the currency pair is seen near the 10-day moving average at 1.51.  Momentum on the exchange rate remains positive as the MACD (moving average convergence divergence) index prints in the black with an upward sloping trajectory that points to a higher exchange rate.

Article by ForexTime

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