08:48, 08 November

Moves to Three Week High as BOE Watches Brexit

The last couple of weeks have seen the GBPUSD surge higher and regain a lot of lost ground moving up to a three week high back above the key 1.3050 level. It will now have eyes on the other key level near this range at 1.3250 which has repeatedly fended off the currency pair’s attempts to move higher. The few weeks before the recent surge saw the GBPUSD drop sharply down to its lowest levels in two months below 1.28. Just before this recent fall, the GBPUSD had enjoyed a couple of solid weeks rising sharply back to the resistance at the key 1.3250 level before being sold off again. Around mid-August the GBPUSD also rallied well which saw it regain lost ground from a 15 month low below 1.27, before reversing strongly again at 1.3050.


Throughout July the GBPUSD was content to trade in a very small range right around the 1.31 level. It was also feeling some selling pressure from the resistance level at 1.32. The 1.30 level that provided strong support to the GBPUSD and was a key level throughout 2017 seems to have lost its significance as the 1.3050 is more relevant presently. Throughout most of May the GBPUSD dropped dramatically from the resistance level around 1.43 down to the 1.32 level. The 1.36 level provided some resistance to the sterling in the last nine months or so and providing a little bit of support, except the GBPUSD continued lower through this level.

Earlier this year we were looking at the resistance level at 1.43 looming like a dark cloud in the distance ready to strike. Several times this year the resistance around that level stood firm and sellers jumped all over the GBPUSD forcing it down to several lows. Interestingly, despite all the aggressive selling it wasn’t so long ago the GBPUSD hit a two year high above 1.43.

The Bank of England (BOE) says a 'smooth' Brexit could quicken its rate-hiking cycle, however it remains its number one concern.The central bank said in a statement that despite good economic data, the uncertainty surrounding Brexit seemed to have hit business sentiment and could bring further volatility.So far, the BOE has acted on the basis that the United Kingdom and European Union will reach an agreement over Brexit. The BOE highlighted that as the process to leave the EU unfolds, there could be changes to rates in either way.Last week the central bank kept its benchmark interest rates unchanged, as they voted unanimously to hold rates at 0.75%.In August this year, the bank raised interest rates by 25 basis points, which was only the second time since the global financial crisis."Were the economy to continue to develop broadly in line with the November Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate," Mark Carney, BOE governor told reporters, hinting that if a Brexit deal is achieved there could be further increases to rates.Earlier last week the U.K.'s finance minister Philip Hammond announced some stimulus measures, which BOE’s Carney was quick to point out their rates decision and forecasts did not include.