Cable Tests 1.70 on Hawkish BOE Speak
Cable pushed through 1.70 on its way to 1.7010 before facing geopolitical headwinds as fresh hawkish BoE-speak pushed the interest rate differential in favor of the UK currency. BoE’s deputy governor Bean said that a first rake hike would be a good thing as, “I would welcome us getting on to the path of normalization, as a demonstration that the economy is healing.” The now sharply contrasting BoE and ECB policy stances suggest the EURGBP cross will remain a sell-on-rallies, with scope seen toward 0.7500. BoE’s Carney last week signaled at a keynote speech that interest rates could rise sooner than markets expect.
BoE deputy governor Bean turns hawkish, backing up last week’s rate hike signal from BoE governor Carney. Bean said in a Sunday Times interview that a first rake hike would be a good thing as, “I would welcome us getting on to the path of normalization, as a demonstration that the economy is healing.” He said it would be a “symbolic step, because it will be an indication that we are on the road back to normality.” MPC’s Weale has also argued recently that small, incremental rate rises would be better started sooner rather than later if potentially disrupting bigger and more sudden tightening’s were to be avoided further down the road. Markets are now in considering a rate hike will come before year-end.
Support on the GBPUSD currency pair is seen near the 10-day moving average at 1.6830. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The trajectory of the index is positive pointing to a higher exchange rate. The RSI is printing near 65, which is the upper end of the neutral range.
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