Pound/dollar is deep into the pre-election territory, trading around 1.2980. This was high before the June 8th vote. The pair has already reached a high at 1.2995, getting very close to the psychological barrier of 1.30.
The cause is Carney: the Governor of the Bank of England changed his mind quite quickly. From saying it is “not the appropriate time” to raise rates, the central banker said that it may be time to remove stimulus. His words at Portugal sent the pair over 150 pips up.
Cable was already edging higher within the range on the weakness of the US dollar. Fed officials have been casting doubt about rising inflation.
Has it gone too far?
The UK government will get its vote of confidence today and Brexit talks are moving forward. However, Carney change of heart may be temporary.
The UK economy is struggling in 2017, contrary to the post-EU Referendum growth seen in 2016. The economy grew by only 0.2% in Q1. Tomorrow we will get the final read. It may serve as a reminder that the BOE may have to wait before raising rates.
In addition, while the UK government is moving forward, it may not last that long. Even with the DUP, May’s majority is very thin and her cabinet is split between soft and hard Brexiteers.
If 1.30 is broken, the cycle high of 1.3050 is the next level of resistance. The next cap is already a level seen last year: 1.3130.
On the downside, we find 1.29, 1.2820 and 1.27. All were levels of support and resistance in June and May.
UK data has been mixed
Earlier in the day, Britain released a few figures: net lending to individuals jumped to 5.3 billion, above expectations. On the other hand, M4 Money Supply slipped by 0.1%, worse than 1.3% predicted.
The big event is coming tomorrow: the final read of GDP.Get the 5 most predictable currency pairs