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Sterling Boosted by BOE Statement

Posted by Joseph Trevisani on Sep 14, 2017 11:47:09 AM

Sterling continued it ascent as the Bank of England warned that a rate increase could occur within months if the economy performs as expected.

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US FX Market Open –Wednesday September 13, 2017: GBP/USD briefly hits 12-mth high

Posted by Marge Maresca on Sep 13, 2017 11:56:25 AM

Overnight Events

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Topics: US FX Market Open

Sterling Strikes One-Year High on Inflation Jump

Posted by Joseph Trevisani on Sep 12, 2017 9:45:27 AM

An unexpected surge in U.K. inflation brought the pound to a one-year high against the dollar as traders speculated that the Bank of England will have to raise interest rates sooner than anticipated. Sterling also rose against all its major currency counterparties. 

The consumer price index jumped 0.6 percent in August, beating the 0.5 percent median estimate, far out-stripping July's -0.1 percent reading and tripling the 0.2 percent monthly average this year. Annual inflation rose to 2.9 percent  from the prior month's 2.6 percent for the highest year-on-year reading in four years.

Sterling initially gained 0.9 percent on the dollar reaching 1.3287 its best in a year, before settling around 1.3250  mid-morning in New York.

The pound has now crossed the 38.2 percent Fibonacci retracement of the June 24, 2016 to January 16, 2017 fall, 1.5018-1.1979 for the second time. It traded to 1.3164 onAugust 3rd but subsequently dropped back to 1.2797.  Prospects for continuing gains are considerably higher this time. around.

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Chart: Thomson/Reuters

 

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BOE-Brexit constraint to limit GBP support

Posted by Marge Maresca on Sep 11, 2017 7:36:46 PM

GBP might be doing well against the USD but the MPC will be more focused on its performance on a trade weighted basis where the exchange rate has been heading back toward its Oct 2016 lows. If this weakness accelerates and is seen as a function of diverging policy differentials then this is a risk that could see the BoE make an adjustment to interest rates. However, for now the BoE will have to make do with yet more tough talking maintaining that monetary policy “could need to be tightened by a somewhat greater extent” than implied by the market. There will be an attempt to highlight the inflationary impact of the recent fall in GBP TWI but countered by continued concern over consumer spending and a need to watch investment and wages. The BoE has been attempting to sound hawkish but its message continues to be ignored by the market due to Brexit negotiations. Given the uncertainties of Brexit it is going to be difficult for the BoE to adjust its communication in a meaningful way. Over the last few weeks it has become clear that the risks of a breakdown of Brexit negotiations and a cliff edge scenario have increased, but the BoE will persist in assuming a smooth Brexit. We continue to expect the BoE to remain on hold over the next 2-years and at least until there is greater clarity over the Brexit process. 

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Topics: GBP/USD

Pound Reverses, Dollar Overtaken on Hurricane, Korean Woes

Posted by Joseph Trevisani on Sep 8, 2017 10:06:25 AM

Updated at 1:20 pm, 9/8/17

The British Pound rose to a five-week high against the dollar as Brexit inspired short positions were closed on better than expected U. K. factory data and the impact of Hurricane Irma and tensions on the Korean peninsula undermined the greenback.

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