Cable is Stable after In-line GDP
Sterling has been one of the better performing currencies over the past few weeks, as investors baked in a neutral policy for the Bank of England. Data points during early October showed that the UK economy was performing better than in the recent past, with increasing levels of inflation and a tightening labor market.
At its last meeting the Bank of England stated that stimulous was likely no longer needed to boost the UK economy, and that the bank would likely keep quantitative easing off the table for the foreseeable future.
Today the UK reported third quarter growth domestic product, which came in at 0.8 q/q, which was in line with expectations. The 1.5% y/y rate is positive but far from self-sustaining. In a speech yesterday, Governor Carney said the Central Bank would widen access to liquidity insurance to the financial system. The bank will expand the range of collateral that could be posted to liquidity facilities. This sounds more likely easing than tightening and it is no wonder that the pound has been unable to break through recent resistance levels.
Cable has been testing the recent highs at 1.6260 but has been unable to break through to new highs. The yield differential is moving in favor of the UK especially after the US government reopened at the end of last week. Support on the GBPUSD currency pair is seen near the 10-day moving average at 1.6110 and then and upward sloping trend line seen near 1.6060.
Momentum on the currency pair is flat with the MACD printing near the zero index level and a stable trajectory. The RSI (relative strength index) is printing near 59 which is on the upper end of the neutral range.
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