The pound on Thursday slightly strengthened after the publication (at 09:30 GMT) of data on business activity in the manufacturing sector and the number of approved mortgage loans in the UK in January. As shown by the data provided by the Bank of England, the number of approved mortgage loans in the UK in January reached a six-month high after a fall in December (67,478 versus 61,692 in December). The January figure was the highest since July 2017 and significantly exceeded the average for six months.
The index of business activity of purchasing managers (PMI) in the manufacturing sector for February was 55.2 versus 55.3 in January (the forecast was 50.0).
The pound received little support after the publication of the data, but, economists believe, for a short while. On Wednesday, the pound declined significantly in the foreign exchange market after some details of the draft agreement on the exit of the UK from the EU became known, according to which, in particular, the creation of a customs border between Northern Ireland and the rest of the UK is envisaged.
Thus, the dynamics of the pound in the coming months will strongly depend on news about Brexit. Although the collapse of the British economy after the referendum on Brexit in June 2016 did not happen, however, the pound fell sharply, which contributed to a significant acceleration of inflation in the UK. In this regard, the income of the British and their purchasing power declined, which affected domestic trade and retail sales. Since, the British economy is focused, first of all, on the domestic market; the decrease in domestic trade has a negative impact on the country's GDP.
In November, the Bank of England raised its key interest rate for the first time in a decade to contain inflation. Recently, central bank officials signaled that the rate may need to be raised earlier than originally expected. This is a strong factor in favor of strengthening the pound. At the same time, the pound will remain vulnerable against the euro and the dollar against the backdrop of Brexit.
The dollar, on the other hand, receives strong support both from the growing expectations for a faster rate of tightening of the monetary policy of the Fed, as well as from strong macro data coming from the US recently.
Today, the focus of traders will be the publication of a block of important macro data on the US (from 13:30 to 15:00 GMT), as well as the speech of the head of the Federal Reserve Bank Jerome Powell in the banking committee of the Senate (at 15:00 GMT). If he more specifically signals about the high probability of 4 interest rate increases this year, the dollar will receive an additional impetus for growth, including in the GBP / USD.
*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics
Support levels: 1.3725, 1.3630, 1.3550,
1.3420, 1.3390, 1.3210
Resistance levels: 1.3890, 1.3970, 1.4050, 1.4100, 1.4185, 1.4340, 1.4400, 1.4500, 1.4575
Trading Scenarios
Sell on the market. Stop-Loss 1.3810. Take-Profit 1.3700, 1.3630, 1.3550, 1.3420, 1.3390, 1.3210
Buy Stop 1.3810. Stop-Loss 1.3690. Take-Profit 1.3890, 1.3970, 1.4050, 1.4100, 1.4185, 1.4340, 1.4400, 1.4500, 1.4575
*) For up-to-date and detailed analytics and news on the forex market visit Tifia Forex Broker website tifia.com
