Pound Doesn’t Rise with Prices
Posted on November 17, 2009 by Yohay
Filed Under Forex News | 4 Comments
For the first time in 8 months, consumer price index posted a rise. This justified the Pound’s recent rise, the relatively hawkish rate decision . The Pound got more fuel to reach the next levels. It is still far from the next resistance level, and has room to rise. But currently,, it’s giving in to the dollar, which is rising across the board. Let’s see what’s next for cable.
Consumer Price Index (CPI) rose in Britain by an annualized rate of 1.5%. This exceeded expectations of a 1.4% rise and was better than last month’s 1.1% rise which was too close to the bottom border of the target inflation rate. Also Core CPI made a small surprise and went up by 1.8%, more than last month’s 1.7% rise.
Retail Price Index, RPI is also an important inflation figure. It is sometimes considered a better indicator for prices in Britain. Here, prices have been dropping, and also this time, there was a drop of 0.8% – an 8th consecutive drop. But, also this exceeded expectations that stood on a 0.9% drop.
This rise in prices happens despite the fact that Britain is lagging behind the world, and still suffering from recession.
GBP/USD returned to last week’s high level of 1.6843, and even pushed forward to 1.6860 in recent hours. There was no resistance line there. After the release, GBP/USD rose slightly, reaching 1.6870. This rise is still hesitant.
But about half an hour later, the dollar began a strong move across the board. The Pound didn’t escape this dollar sweep, and lost ground, currently trading at 1.6780.
What’s next for the Pound?
A major resistance line appears at 1.7040, the year-to-date high that the Pound reached in August before tumbling down. So, the Pound has over 150 pips of space to climb rather easily, before meeting resistance.
Further above, 1.7440 is the next resistance line. Looking down, 1.67 still serves as a support line.
Tomorrow, the MPC Meeting Minutes is awaiting the Pound at 9:30 GMT. We’ll get to see where the wind blows towards more quantitative easing (Pound-bearish) or a shift of tone towards a future rate hike (Pound-bullish).
Further reading:
- Mohammed Isah’s recent GBP/USD technical analysis.
- My weekly GBP/USD forecast.
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