On Wednesday, when a strong report on UK GDP for the third quarter was presented, the pound rose sharply in the foreign exchange market. Preliminary GDP of the UK, according to the data, in the third quarter increased by 0.4% (+ 1.5% in annual terms). The forecast was + 0.3% and + 1.5%, respectively. The data presented strengthened expectations of an increase in interest rates of the Bank of England at a meeting on November 2. The pair GBP/USD rose on Wednesday by 1% or 130 points, rising to 1.3260.
And yet, yesterday and today, the pound is down against the dollar after the other currencies, the rivals of the dollar. Despite the fact that the probability of an increase in the Bank of England's rate in November has grown, investors are less likely to believe that an increase in the Bank of England's key rate in November will lead to a series of increases. Today, the British pound / US dollar fell to its lowest level in 2.5 weeks at 1.3080, completely cutting off the growth of the pair, fixed on Wednesday.
According to many economists, the increase in November will be the only change in rates in 2017 and 2018. And this, against the backdrop of a strengthening dollar, makes it advisable to sell GBP / USD in the medium term.
The US dollar on Thursday reached its highest level for more than three months against the background of the fall of the euro and the pair EUR / USD. The index of the dollar WSJ, which displays the value of the US currency against a basket of 16 currencies, increased by 0.4%, to 87.53, the highest level since July 13.
At 12:30 (GMT) today a preliminary estimate of US GDP for the third quarter will be published.
In the previous quarter, GDP growth was +3.1%. The forecast for the 3rd quarter of this year is + 2.7%. This will be a fairly strong indicator, given the consequences of hurricanes sweeping over the country's south. GDP data will be key to the direction of the dollar's development ahead of the Fed meeting, which will be held next week and will end with the publication on November 1 of the interest rate decision.
Also, together with the GDP data, the inflationary price index and the price index for personal consumption expenditure will also be published, also for the third quarter. If the data prove to be worse than the forecast, the dollar may react with a decrease. Then, at the end of the last full trading week of the month, profit can be fixed in long positions on the dollar, which will cause its decline, including in the pair GBP/USD. If the data coincides with the forecast or will be stronger, the dollar will continue to grow.
Given the Fed's predilection for further tightening of monetary policy, the success of the US administration in implementing the new economic policy in the US (on Thursday the US Congress approved the draft budget, which would allow changes to the tax code), as well as strong macroeconomic indicators coming from the US, is likely further growth of the dollar in the medium term.
Support levels: 1.3000, 1.2975
Resistance levels: 1.3150, 1.3185, 1.3210, 1.3260, 1.3300, 1.3335, 1.3440, 1.3500, 1.3630, 1.3760
*) For up-to-date and detailed analytics and news on the forex market visit Tifia Forex Broker website tifia.com