The pound moved in a tight range in the first half of the week as investors preferred to stay on the sidelines ahead of the interest rate meetings, scheduled for the second half of the week. The British currency, however, lost some of the upward momentum it had gathered in the previous week as some worse-than-expected economic data hit the wires on Monday. The net lending to individuals increased by only 0.3B for the month of June after rising 1.1B for the previous relevant period. Analysts were expecting a much more modest decline to 0.8B. At the same time mortgage approvals slipped to 44,000 from 51,000 for the month of May. Again economists were projecting a much less steeper decline to just 49,000. After the news were announced the sterling moved lower, but the losses remained somewhat limited as investors hesitated to make any decisive actions ahead of the Bank of England’s meeting on Thursday. Even the fact that the CBI consumer spending indicator came below consensus was not sufficient to chase the bulls away from the currency pair. On Tuesday, the British currency continued moving lower, but the selling pressure was somewhat curbed by the bulls, when the pound approached its 25-period moving average. Towards the end of the session, however, when the BRC shop price index disappointed we finally broke sustainably below the support and finished at 1.5666. Wednesday was a big day for the sterling as the closely monitored manufacturing PMI and nationwide HPI for the U.K. economy were announced. Both figures disappointed with the manufacturing PMI remaining below the key 50 level, indicating that the sector continues to contract. Analysts were expecting it to expand for June. The house price index for July also deteriorated, indicating that the housing market in the U.K. is far from improving. In a response to these bad data the British currency plunged, pushing below both its 50-period and its 200-period moving averages. The pound even tried to break the 1.5550 level, but it failed to do so as the bulls were finally able to regain some of their strength. Today the pound finally caught some fresh air as the construction PMI surprised on the upside. Economists expected the sector to remain in contraction mode, but instead it expanded. At the same time Bank of England chose to leave its official bank rate unchanged at 0.50% and it also refrained from further expansion of its balance sheet, adhering to the 375 billion pounds it decided to commit to buying assets. After the news hit the wires the sterling shot up and it is currently trading around the highs for the session around 1.5626. The previous resistance levels around the 50-period and the 200-period moving averages were quickly overcome and they will probably act as support from now on. Resistance on the way up is provided by the 25-period moving average, which is standing around 1.5657. Oscillators are in mid-range with the relative strength index at 37, while the stochastic is approaching oversold territory, currently standing at 19. The MACD has just pushed below the key 0 level, but it still has some room to go before touching the lows of last week.
Disclaimer:
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.
