GBP/USD surges on BOE remarks, US retail sales
James Chen July 15, 2015 1:14 AM
<p>GBP/USD (daily chart shown below) surged on Tuesday after Bank of England Governor, Mark Carney, suggested that the time for a rise in interest rates […]</p>
GBP/USD (daily chart shown below) surged on Tuesday after Bank of England Governor, Mark Carney, suggested that the time for a rise in interest rates may be getting closer. Also contributing to the GBP/USD rise was a US dollar drop due to a disappointing US Retail Sales report for June that showed a -0.3% change on consensus expectations of a 0.2% gain.
Carney stated, “the point at which interest rates may begin to rise is moving closer with the performance of the economy, consistent growth above trend, a firming in domestic costs, counter-balanced somewhat by disinflation imported from abroad.”
Together, Carney’s remarks along with the retail-driven drop in the dollar prompted a substantial climb for the GBP/USD that tentatively broke out above key 1.5600 resistance. This climb significantly extends last week’s major rebound off the 200-day moving average. In turn, that rebound followed a three-week plummet from the year-to-date high of 1.5928 in mid-June.
Besides rising above the noted 1.5600 resistance level, Tuesday’s surge also nudged the currency pair slightly above a short-term downtrend resistance line extending back to June’s 1.5928 high. Any further upside momentum above 1.5600 should be limited by major resistance around the 1.5800 level.
While the time may indeed be closer for a rise in UK interest rates, a rate hike in the UK will most probably occur well after a US rate hike. If this is to be the case, with respect to GBP/USD, any rate-driven rise in the pound should likely be tempered by a potentially equal or greater rate-driven rise in the US dollar.
Any rebound in US dollar strength after Tuesday’s pullback could provide an impetus for a GBP/USD retreat and a continuation of the bearish move back down towards 1.5200 support.
Other potential upcoming catalysts for GBP/USD movement are the US Producer Price Index and UK unemployment data in the form of the Claimant Count Change, both set to be released on Wednesday.