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20 Mar 2013
Has the ‘Old Lady’ sung?
FXstreet.com (Barcelona) - There was no ‘surprise-factor’ after the release of the BoE minutes, giving a long-awaited boost of oxygen to the sterling, which climbed to test Monday’s weekly highs in the boundaries of 1.5160
The MPC showed no rush at all to expand the asset purchase programme further, a motion favoured once again by Governor M.King and the arch-dove D.Miles. Finally, King’s vote came in as expected after former dovish comments on the pound a couple of weeks ago. The rest was nothing to write home about, as the lending benchmark stayed intact at 0.5%.
… UK Budget following
The next hurdle for the sterling will be the UK Budget, where consensus is split regarding, for instance, a change of the BoE remit to allow higher inflation in order to find any sparks to bring the UK economy back to the growth path. This would immediately open the door to an additional injection of liquidity, being GBP-negative.
In addition, the pound could face lower growth forecasts coupled with an increase in its borrowing estimates, a combination that could unveil the likeliness of another rating downgrade.
The UK desperately needs economic growth. A weak pound represents a fairly good first step, although further weakness could spark fears of imported inflation. Recent market chat about infrastructure projects (housing and roads) hovering over UK officials’ minds would add to the generalized desire, although nothing has been confirmed yet.
When comes to the technical realm, GBP/USD is now navigating below the downtrend line set from 2013 highs around 1.5120/25
The immediate resistance sits in the area of 1.5175/95 (23.6% of Feb – March decline and March 15th highs) ahead of 2012 lows at 1.5239 en route to the downtrend line at 1.5300
On the flip side, the initial support awaits at the psychological 1.5000 figure, followed by multi-year lows at 1.4831 (March 12th).
The MPC showed no rush at all to expand the asset purchase programme further, a motion favoured once again by Governor M.King and the arch-dove D.Miles. Finally, King’s vote came in as expected after former dovish comments on the pound a couple of weeks ago. The rest was nothing to write home about, as the lending benchmark stayed intact at 0.5%.
… UK Budget following
The next hurdle for the sterling will be the UK Budget, where consensus is split regarding, for instance, a change of the BoE remit to allow higher inflation in order to find any sparks to bring the UK economy back to the growth path. This would immediately open the door to an additional injection of liquidity, being GBP-negative.
In addition, the pound could face lower growth forecasts coupled with an increase in its borrowing estimates, a combination that could unveil the likeliness of another rating downgrade.
The UK desperately needs economic growth. A weak pound represents a fairly good first step, although further weakness could spark fears of imported inflation. Recent market chat about infrastructure projects (housing and roads) hovering over UK officials’ minds would add to the generalized desire, although nothing has been confirmed yet.
When comes to the technical realm, GBP/USD is now navigating below the downtrend line set from 2013 highs around 1.5120/25
The immediate resistance sits in the area of 1.5175/95 (23.6% of Feb – March decline and March 15th highs) ahead of 2012 lows at 1.5239 en route to the downtrend line at 1.5300
On the flip side, the initial support awaits at the psychological 1.5000 figure, followed by multi-year lows at 1.4831 (March 12th).