The British Pound against the US
dollar, or Cable as it is known in Forex circles, has recently shown technical
indications that it might be about to undergo a trend change. It might have
rebounded in anticipation of reaching a well-established long-term support
level (see above). There is also a possibility that it is about to break out of
its medium-term downtrend channel, to the upside.
Fundamentally, the British economy
has been getting back on a sound footing for some time. True, indications of
interest rate rises by the Bank of England have had an “on-again, off-again”
flavour, but recent comments by the BoE Chief Economist, Andy Haldane, have
brought them to the fore again. He recently indicated the speed at which rates
would rise when the decision is eventually made to tighten monetary policy. The
question is a matter, it would seem, of “when” rather than “if”.
The great unknown, of course, is the
upcoming British general election, which is currently timed for May 7th
next.
But there is another event, which
takes place later today, that could have a bearing on the potential for a
Sterling rally. As we
pointed out previously, the US dollar is overbought. Any disappointment in US
Non-Farm Payrolls, due to be released at 13:30 GMT today, could also have the
effect of propelling this pair to the upside.
Aussie
dollar still resilient
Yesterday
we highlighted the recovery of the Aussie dollar from the knee-jerk
reaction to the recent core interest rate cut by the Reserve Bank of Australia
(RBA). Now, in its finalised statement
of monetary policy, issued yesterday, it can be seen that the RBA is also
pessimistic about nearly every other measure of economic well-being. This
extends to downgrades of GDP, employment prospects, inflation, terms of trade
and hard commodity prices. Yet the currency holds it value and is, at the time
of writing, above the level it was before the rate cut was announced.
What does the RBA have to do to
achieve its stated aim of a lower Aussie dollar exchange rate?
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