The Pound Sterling had a very good day yesterday. The reason was a
report by the Monetary Policy Committee of the Bank of England to the effect
that its estimation of future economic growth in the UK has had to be revised
significantly upward. The governor of the Bank also indicated that his policy of
“Forward Guidance” would be modified somewhat in order to take into account the
fact that unemployment, which had previously been the sole criterion for policy
decisions, needed to be supplemented by other measures when it came to decision
making.
However, Mr. Carney did say that Forward Guidance was working. According
to him, it had allowed businesses and private individuals to plan better. As
Mandy Rice-Davies said during a trial concerning the Profumo Affair in the
‘Sixties, “He would say that, wouldn’t he?”. Forward Guidance was Mr. Carney’s
Big Idea when he became BoE governor in mid 2013 (you can read about Ms. Rice-Davies and the Profumo Affair here).
Will it march through the
Moving Average resistance barrier?
On Jan 30th last we highlighted
the fact that Cable, as the pound / US dollar pair is known, was
once again approaching the 200 period Simple Moving Average (SMA) on the
monthly chart. This Technical Indicator has acted as an efficient resistance to
its rise in the past, ever since the dramatic tumble following the Global
Financial Crisis:
There are now reasons to suspect that this resistance might well be
breached in the coming sessions. The UK is coming ever closer to the
point where interest rates might have to rise. Inflation, while now contained
near the 2% level that all economist seem to believe is optimum, is nevertheless
a long way from the low rates that pertain in other major economies, where the
dread of deflation is keeping Central Bankers awake at night.
We will be keeping a close eye on the level of the 200 period Simple
Moving Average on the monthly chart for GBPUSD.
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