The pound was off slightly after the Bank of England held interest rates at an all-time low and did not adjust the Asset Purchase Facility. Market participants expected the moves by the BOE and the pound should continue its uptrend versus the dollar as the May BOE meeting approaches. Here expectations run high for an increase to the interest rate following the release of Q1 GDP data.
Despite rising inflationary pressures in the UK, the members of the Monetary Policy Committee decided to pass on a rate hike. In February, UK inflation rose to 4.4%. Economists suggest that an increase to the interest rate will happen in May as MPC members may want to see a recovery in growth rates before raising the interest rate. Q4 2010 British GDP contracted -0.5%. Q1 2011 GDP is forecasted to rise 0.7%.
Technicals are beginning to show the GBP/USD is overbought as daily stochastics chart are beginning to cross. That is not to say that the uptrend is at risk. Momentum continues to rise and value buyers should be found near the 100-day moving average at 1.5950 and the March low at 1.5930. Additional support is located at Monday’s high at 1.6180. To the upside, the 1.6400 resistance remains the target and above that 1.6460 from the January 2010 high.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
