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  • GBP/USD actually buckled on the cautious minutes, unable to get above the 21-D SMA with conviction.  
  • FOMC minutes:  policymakers saw intensified risks around trade policy.

GBP/USD has been unable to climb on the back of a cautionary set of minutes from the FOMC’s June meeting whereby policymakers saw intensified risks around trade policy. Currently, GBP/USD is trading at 1.3215 with a high of 1.3275 and a low of 1.3204.

GBP/USD actually buckled on the minutes despite the dollar giving back some ground in the DXYU, only to gather those pips back, currently trading at 94.48 with the day’s range of between 94.1770-94.5900.  

Key take away statements from June minutes:

  • Some officials: running economy to hot risks economic downturn.
  • Saw fiscal policy supporting economic growth.
  • Price moves support outlook for 2% inflation.
  • Broad support for gradual rate hikes.
  • A few beneficial saw US fiscal policy as upside risk.
  • Many business contacts concerned by risks from a trade war.
  • So downside risks from emerging markets, Europe.
  • Important to watch yield curve slop.

Meanwhile, on the domestic front,  BoE Gov. Carney expressed “greater confidence” that the UK economy was performing better after the weather-related slowdown in Q1.  

Analysts at Scotiabank explained that the latest survey activity – and this week’s UK manufacturing, services and construction PMIs – “certainly bear that notion out and markets are taking note”.  The analysts added that an August rate hike is now 80% priced in, lifting the pound:

“We remain quite concerned, however, that constructive sentiment on the pound might run into the reality of messy Brexit politics in the next few days as PM May attempts to formulate a workable Brexit policy for all stakeholders. Her latest compromise proposal to settle trade/border issues, which she will detail tomorrow in a cabinet “off-site” at Chequers, has already been rejected by her Brexit Minister. Not a good sign.”

GBP/USD levels

The pound is holding in bullish territory above the descending channel’s resistance line. 1.3252 comes as the first key target to get to and hold above. The price had penetrated that earlier but lacks conviction. It comes as the 21-D SMA which is guarding a run towards 1.3315 Jun 22 high and the 1.3331 weekly cloud top. RSI turns neutral as the price tests the top of the channel’s resistance. 1.3461/80 is key ahead of 200-D SMA and 1.3588/1.3600 levels. The 1.3708 level at the 50% Fib of 1.3040-1.4377 remains compelling on the wide. To the downside, the 1.3000’s are open below the 1.3040 level, as the Nov 3 low. Deeper, eyes will turn to the 1.29 level.