For a little while now we
have been pointing to the fact that cable, the GBPUSD pair, might be on the
cusp of breaking out of the price range that has defined it since the aftermath
of the Global Financial Crisis.
It has taken some time, but
now the economic indicators coming out of the UK are aligned in a direction that could
well be a harbinger of such a development. Earlier this week, GDP figures were
a shade lower than many watchers had expected, but the trend here is still up.
So are retail sales, manufacturing and inflation figures, relative to the rest
of the developed world. Even job numbers, which seem to be benefiting from a
greater reliance on self-employment, are showing marked improvement.
Now price is also moving,
slowly but surely, beyond the barrier that has been the monthly 200 period
Simple Moving Average (SMA) and has reached a level not seen in the last
four-and-a-half years, since November 2009. Will it continue out into the clear
blue water that exists to the upside?
A busy day for announcements
Today is a busy day in terms
of economic announcements that have the capacity to impact currency exchange
rates in the major economies. On the same day we have results and announcements
in the key drivers of market sentiment in both Europe and the USA . These
follow on the heels of the annualised GDP figures for the UK yesterday,
which showed an improvement in economic growth, but not quite as much as
economist were expecting. The bottom line, however, is that the UK economy is well
on track for robust recovery in the months to come.
Inflation, or rather the lack
of it, is the bugbear in the Euro zone at present and at 09:00 GMT the
Year-on-year Consumer Price Index (CPI) for those countries in the Single
Currency will be released. The ECB will not be the only ones to take notice.
Later, at quarter past midday
GMT, the ADP Employment change report will be released. This private firm attempts
to anticipate the all-important US Non-Farm Payrolls report, which comes out on
Friday. Expect 200k + new jobs to have been created. Anything less will be a
disappointment.
At half past midday the US
GDP figures are released, which will also be closely watched to maintain the
confidence that has built up that QE is on the way out. Later in the day the
two day FOMC meeting that has been taking place will come to an end with
announcements about interest rates (no change expected here), monetary policy
and further details about the tapering of QE. Expect this to be continued as
per the schedule set in the last number of meetings. There will be no press
conference on this occasion so the market will have to glean what it can from
the announcements.
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