Sterling Moves Higher Ahead of Referendum; MACD Generates Buy Signal
The GBPUSD moved higher on Thursday and is holding on to gains as Scotland’s historic referendum on independence gets underway. Results will start to come through from early Friday morning. Analysts are expecting “no to independence” will eventually win out as negative economic consequences and the lure of fresh devolution pledges should do they persuade the portion of voters who do not hold a clear-cut opinion. The gains in the pound come despite a weaker than expected CBI Trend survey, and a robust Retail Sales report.
The U.K. CBI industrial trends survey came in much weaker than expected in September, plunging to a -4 reading in the total orders headline. Export orders drove the overall drop, falling to -24 from -3 in August, reflecting the stagnation in the Eurozone economy. The minutes to the September BoE MPC meeting, released yesterday, revealed that committee members have placed downside risk to growth projections into year-end.
Consumer spending continues to hold up as was reflected by a solid retail sales report. U.K. August retail sales recovered from July weakness, rising 0.4% month over month, matching the consensus forecast, and 3.9% year over year, which is the best since April. This fitted the picture already painted by the private BRC retail sector survey. Rising employment has helped offset the chronic negative inflation-adjusted average household income trend.
The currency pair bounced off of support levels near the 10-day moving average at 1.6230, and is poised to test target resistance at the September highs at 1.6615. Momentum on the currency pair turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.
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