As can be
seen from the chart above, the British pound against the U.S. dollar, while
exhibiting symptoms of manic behaviour with its monthly oscillations, is also
trending down on a medium term basis. The 200 Day Exponential Moving Average
(EMA) is providing a resolute resistance, and the chart shows clearly that the exchange
rate is marking out a series of lower lows and lower highs, the classic definition
of a falling trend.
The Euro
took a hit against the dollar yesterday, too. After a slow decline in the
London session, it sold off after the open in New York, and this move was
further exacerbated in the Asian session last night.
The fall of
the Euro can be expected, given the divergence between U.S. and Eurozone
monetary policy. In the case of the pound, the tendency can only be explained
by a realisation on the part of the markets that, having not so long ago been
recognised as the currency most likely to win the race for the start of
interest rate rises, it has now receded to the position of also-ran in the
light of the firm expectation that it is the U.S. that will be the first major
economy to do so.
U.S. inflation figures today
Inflation is
a major determinant of interest rate rises. In the UK and the Eurozone,
headline inflation is rattling along pretty close to zero, while core inflation,
which excludes energy and food, is at about half the level the central bankers
would like it to be.
The
situation is somewhat better in the U.S. Today sees monthly Consumer Price
Index (CPI) reports from both the U.S and the U.K, which will throw further
light on the matter.
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