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GBP/USD: Limited recovery, remains near multi-year lows

FXStreet (Córdoba) - A week ago the pound started an important rally against he US dollar, recovering from the lowest level since 2009 but it was limited and after a sharp reversal, cable is about to end the week modestly lower.

From 2-week highs to 1.42

During the Asian session, the decision of the Bank of Japan boosted risk appetite and GBP/USD climbed to 1.4412, hitting a 2-week high. The pair appeared to be ready to extend the rally but it turned to the downside falling more than 200 pips in a few hours.

The rally was capped again by the 20-day moving average that stands around 1.4390. The pair traded above but it failed to consolidate and ended making a reversal. During the last hours of trading, it trimmed losses and climbed back above 1.4200. It was about to end the week around 1.4220/40, slightly below last week close.

Another busy week

After days with key economic data from the UK and the FOMC decision, next week is also going to be busy. The most important event will be the release of the Bank of England decision (and the Inflation Report) and the Non-Farm Payroll report in the US.

No change is expected in the BoE, attention will lie on the minutes of the meeting and on the inflation report. “Despite the upward impacts of a 4% weakening in trade-weighted sterling since the November report, further downgrades to projections for GDP growth and inflation over 2016 and 2017 are expected”, said analysts at Lloyds Bank.

In the US, markets consensus point toward an increase of 200K in NFP. Analysts from TD Securities expect the pace of employment growth to slow to 177K and the unemployment rate to remain unchanged at 5.0% “In the coming months, we expect the positive momentum in the labor market to be sustained, though the pace of growth should remain in the 175K to 200K range.” A NFP number considerably below expectations would reduce expectations of another rate hike by the Fed during the first half of 2016.

Mixed Norwegian data keeps EUR/NOK elevated - UBS

Friday's multiple data releases from Norway failed to strengthen the NOK, which is still relying on market risk sentiment and oil prices for now. According to UBS analyst team, the data indicates that the Norwegian recovery story may take a bit longer than previously assumed. “We still see markets pricing EUR/NOK too high compared to fundamentals, but are also monitoring risks of a further delay of Norway's economic recovery.”
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Fed: Better safe than sorry - Commerzbank

In its statement on Wednesday, the Fed kept the door open to an interest rate rise in March, according to Esther Reichelt, analyst at Commerzbank, the USD is therefore becoming increasingly sensitive to the economic data. “A good labour market report next Friday should support the USD for now.”
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