Central Bank Paths Drive Sterling Higher
Sterling remains well bid with Cable making a new high for the day at 1.7060. The pound breached the 2008 peak of 1.7046 Thursday in making 1.7063, and it just looks a matter of time before resistance is taken out. Dips are remaining shallow, as gilts continue to under perform other sovereign debt.
The U.K. May government borrowing came in near expectations, with public sector net borrowing excluding the temporary effects of financial interventions, the transfer of the Royal Mail Pension Plan and the transfers from the Bank of England Asset Purchase Facility Fund was GBP 13.3 billion. This was GBP 0.7 billion higher than in May 2013. The same figure for the financial year 2013-14 worked out at GBP 107.0 billion, GBP 8.1 billion lower than the same period in 2012-13, reflecting a rise in tax receipts, associated with economic recovery, and spending cuts. The central government net cash requirement for the financial year 2013-14 was GBP 75.4 billion, GBP 29.6 billion lower than in 2012-13.
BoE MPC member McCafferty said the timing of rate hike depends on data. He said in an interview with the Guardian that, “Were we to have to go early — and that will depend on how the economy performs over the summer and autumn — I think it would have been damaging if it was portrayed as a surprise. It appeared the markets were more certain of the date of lift-off than we were.” He added that the economy “has grown a little faster than might have been expected at the beginning of the year.”
Following the breakout the next level of target resistance is seen near 1.90. Support is seen near the 10-day moving average at 1.6925. Momentum is robust with the MACD printing in positive territory with an upward sloping trajectory.
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