Forex: GBP/USD lifts to 1.6000 on bullish UK unemployment data and BoE Inflation Report

on Nov 13, 2013
Updated: Oct 21, 2019
Listen Wednesday, November 13th:_ The GBP/USD yesterday started trading at 1.5987 and then reached a high at 1.5991, where resistance pushed the price down. The downtick accelerated following UK data which failed to live up to expectations.

The UK’s annual rate of inflation fell in October to reach its lowest level in more than a year, a result which supports the likelihood that the Bank of England will continue for now with its policy of low interest rates.
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The Office for National Statistics reported earlier today that the Consumer Price Index)fell 2.2 percent in October, from 2.7 in September. The main reasons were lower fuel prices and the decline in the extent of supermarket discounting and promotions. Core CPI y/y rose by 1.7 percent in October, disappointing market expectations for a two percent increase.

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Following the release, the GBP/USD fell to a two-month low at 1.5853, in the process crossing below the strong support and psychological level of 1.5900 which has been acting as an obstacle for bears since 18 September. Subsequently the price rebounded somewhat to close at 1.5901 and lock in a 0.86 percent intraday loss.

Initially today the pair moved sluggishly but following the release of better UK unemployment data and the BoE Inflation Report, the price climbed 1.16 percent to an ongoing intraday high of 1.6001, there hitting the descending 200-hour simple moving average which has been acting as a resistance since 8 November. Currently the quote is trading at 1.5977.

The GBP bulls were pleasantly surprised to see that the number of people claiming unemployment-related benefits in the UK fell by 41,700 in October, whereas analysts had expected a drop of 33,200. The Unemployment Rate also declined – to 7.6 percent in September from 7.7. The downtick accelerated following forecasts-disappointing UK data.
Also earlier today, the Bank of England released its six-month report on the inflation outlook, containing a positive revision of the central bank’s take on unemployment and economic growth. The BoE has undertaken that it will continue to use financial incentives until the economy is in a steady state of recovery. In introducing the report, BoE governor Mark Carney said: “We have one of the strongest recoveries in the advanced world. We are not even going to think about tightening policy until the 7 percent threshold has been achieved. This is the right framework for the right time”.

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In the US today, MBA Mortgage Applications for the past week came out down by a half of a percent, much better than the prior period 7.0 percent drop.
Still to be released (at 19.00 UTC) is the US Federal Budget Balance for September. Analysts are expecting a $104.3 billion deficit. The prior month was a $75.1 billion surplus.
Resistances today: 1.5990, 1.6000 and 1.6040.
Supports: 1.5965, 1.5915and 1.5890.
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