The GBP/USD has displayed a bullish tone since the start of the year to build upon the strong momentum that was seen during 2013. While initially many trade forecasters expect the pair to perform poorly in relation to peers, the Pound has found strength from steadily improving UK data.
This has led to speculation fueled by the Bank of England itself that a rate rise may be on the cards sooner rather than later. With unemployment rates already close to the 7% target that B of E governor Mark Carney stipulated as a trigger level for a increase in rates, traders will be watching this week’s Rate Statement for clues as to the precise timing of any rise.
There are also a number of fundamental factors that need to be factored into this week’s trading on the GBP/USD.
– Wednesday March 5th – Services PMI
– Thursday March 6th – Interest Rate Decision
– Friday March 7th – Nonfarm Payrolls
The data due for release this week is likely to make for volatile trading on the pair. Recent UK figures have been upbeat and so we could see figures that are likely to beat expectations when the Services PMI figures are released on Wednesday. However any move is likely to be tempered by the big news events due later in the week.
No major announcement is expected by the Bank of England in relation to current interest rate levels. However many are predicting that the current recovery in UK economic data could see it as one of the earliest major nations to raise rates from the current level of 0.50%.
Friday sees the monthly Non-farm Payrolls figures. While the figures do not directly relation to Sterling itself, the movement that they can instill in the dollar will no doubt have ramifications.
Trading the pair has been difficult over the pat sessions as price action has been largely ‘range bound’. The pair retains its upwards bias with RSI holding above 50 but not registering in overbought territory.
In addition the pair is yet to close below a rising trend line which has supported downside moves since the middle of June 2013. At this stage a pullback and daily close below 1.66 could signal further falls. However a daily close below 1.6420 would be needed to provide conviction that the current uptrend has come to an end.