Well well well. It is comforting to know that my comments over the past few days have been spot on. It has been a monumental move in GBP reinforced last night after comments by Governor Carney that US interest rates are likely to move higher sooner rather than later. They have no other option really. The economy is starting to show signs of overheating and one way to try slow it is to raise rates. They will as they said be gentle and let the economy absorb the hikes before deciding on the next move. One thing is for certain, if Carney mistimes the hike he could potentially drag the UK back into negative territory so he will have to be absolutely certain the timing is right.
The housing market is leading their need to move sooner rather than later. I guess as i have said hot money has flowed out the USD and EUR and into GBP and this is adding fuel to the fire. They really have no other option. The conservative Govt. and their austerity package has worked. That is a FACT!”! They have reversed the negative trend and put the UK back on the map. Now all we need is for England to win the World Cup and the job will be all but done (well it is wishful thinking).
So what now, we are through 0.8000 and from what i can gather there is an acute desire to try take it lower again as the market digests Carney’s comments. I believe we will see another move lower and the street is now looking for a target of 0.7900-0.7920. Any bounce we believe I believe will be capped at 0.8050. However keep in mond for this to happen GBP/USD MUST BREAK 1.7000. I have been saying the EUR/USD should test 1.3500 and if this is indeed the case this will be a catalyst for the move lower in EUR/GBP.
Here is a comment from a GBP FX trader I completely trust:
“- Carney’s speech last night has basically re-affirmed what we already knew , good data backed up by a very strong housing market is causing concern. The interest rate has become too comfortable after initially kick starting the economy with people’s new found wealth from lower mortgage payments. This has become the expectation now and needs to be addressed. Carney seems to be well in tune and seems to realise the problems but due to the expectation of these low rates any move has to be well sign posted to allow people to re allocate household budgets, thus i believe any move will come a month after a Quarterly Inflation Report (next QIR is August then Nov). Cable after a quiet 2 weeks is now presented with 1.7000 again (1.6998 previous high) 1.7040 resistance above that,, EURGBP should still be the more volatile ccy pair support 0.7950-0.7920 resistance 0.8040”
Have a good day