The British pound is still living in a bullish sentiment with lower prospects of having further easing steps by BOE containing the markets currently after a series of good economic data about the UK Economy which could grow by 1.5% yearly in the third quarter which is the fastest pace since the first quarter of 2011 with decreasing of ILO unemployment rate to 7.6% in the previous 3 months to last September.
These positive signs have pushed BOE forward too to say that there is a probability of reaching the 7% ILO unemployment rate target of BOE’s forward guidance in an earlier time than what has been expected by BOE which has expected that this is to take place in 2016 when it has started to adopt this target last July with Mark Carney Leadership and it has maintained this view in the following meeting to it keeping BOE’s APP unchanged at Stg375b as it has been since July 2012 and also the interest rate at 0.5% as it has been since Feb 2009 and this is expected to be continued also with this week meeting of the MPC by God’s will.
The cable could reach a new year high last Friday surpassing 1.6380 which has been reached in the beginning of the year after avoiding the fiscal cliff in US and God willing in the case of rising further, it can be met by higher resistance at 1.6617 which can be followed by 1.6877 before 1.70 psychological level which can be followed by its highest level since the credit crisis at 1.7041 while going down again can be faced now by supporting levels at 1.6256, 1.613, 1.6056, 1.5987 before 1.5853 whereas it has formed its bottom of this recent rally on 12th of last month on the back of unexpected massive falling of UK CPI to 2.2% y/y which is the lowest level since September 2012 to smooth the way for keeping BOE current easing stance further with no worries about the prices upside risks which are looking well-anchored by the British pound appreciation in the recent months.
While the market will be closely watching this week from UK by God’s will, Nov UK Manufacturing PMI which is expected to rise to 56.3 from 56 in October and also Nov Services PMI after rising to the strongest pace of expansion in the recent 16 years to 62.5 in October from 60.3 in September before Oct UK trade balance which will come before the main event of the week which is US labor report of November after October report has shown stronger than expected rising of US non-farm payrolls to 204k while the markets were waiting for 125k in appreciation of the negative impact of the US governmental shutdown from 148k in September have been revised up to 163k to show solider than expected recovery of this sector had opened the door again for QE tapering probability this year before Yellen’s recent comments in front of the Senate which came to lower again this probability brining down the treasuries yields supporting the US blue chips to rise further telling that the recent achievements of the US economy are not enough to take a decision of tapering soon while there is no bubble threat in the assets markets or inflation pressure yet to drive the Fed to do.
Kind Regards
FX Market Strategist
Walid Salah El Din
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