The pound rose through the 1.34 region on the back of dollar weakness that was seen all across the board following the Fed rate announcement and statement. This has helped to position the pound in a strong manner and it would now await the BOE later in the day to decide whether it would break through the 1.35 region or not.
GBPUSD Moves Through 1.34
The focus was on the dollar with the CPI data and the Fed rate announcement and statement lined up for the day yesterday. The inflation data came in as per expectations and hence did not have much of an impact on the dollar. But the Fed rate announcement came in and though the Fed did hike rates as expected, the accompnying statement was largely dovish. The rate hike was fully priced into the markets and hence did not have much of an impact on the dollar or the GBPUSD pair. But the fact that 2 members dissented and there was a dovish outlook to the inflation data and hence to further rate hikes in 2018, was enough to dent confidence in the dollar which dropped across the board.
This helped the pound to climb through the 1.34 region in a slow and steady manner and it continues to trade above that region as of this writing. The BOE rate announcement and statement along with the monetary policy summary is scheduled to be released during the London session and this is likely to have a large impact on the pound.
It remains to be seen whether the pair would be forced to continue trading within the 1.35 region and if that happens, we can look ahead to a dull period of trading over the next couple of weeks as we wind down for the year. If there is indeed a strong breakout, then we should see the pair move towards the 1.38 region in the short term. The retail sales data from the US would also be released today and that is also likely to bring in volatility.
This article was originally posted on FX Empire