Sterling Holds Steady Ahead of BoE Meeting
Sterling edged lower on Monday as riskier assets came under pressure as Russian moved troops into the Ukrainian peninsula of Crimea. Russia’s move on Crimea and the US and European response will likely be the focus for investors during the balance of the week, despite the plethora of economic data that will be released during the first week of the new month. Lithuania and Latvia have invoked Article 4, which requires consultation over Russia’s actions when a member feels its security or independence is threatened. It is only the fourth such action in NATO history.
The Bank of England is scheduled to meet this week, but there are few who believe the central bank will make any significant moves. Under Carney, the emphasis at the BOE is on using forward guidance to push against market fears of a rate hike sooner than the first part of next year.
The resilience of the UK economy continues with the February manufacturing PMI. It rose to 56.9 from a downwardly revised 56.6 reading in January. While new orders slipped, the employment sub-index rose to 55.4 from 54.1, which is new 3-year high. Separately, consumer credit rose 0.7 billion in line with expectations and mortgage approvals were stronger than expected printing at 76.9k for January compared to the 74.5k expected by economists.
The GBPUSD currency pair is holding steady at the top end of its current range and similar to the Euro is poised to break out. Support is seen near the 10-day moving average at 1.6678. Momentum on the currency pair is positive, but the trajectory of the MACD (moving average convergence divergence) index is flat. The RSI moved higher with price action reflecting accelerating momentum, while printing near 64, which is the upper end of the neutral range.
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