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21 May 2014
GBP/USD a bit stretched, some consolidation ahead - BBH
FXStreet (Córdoba) - GBP/USD rose above 1.6900 Wednesday. The combination of stronger retail sales (three times stronger than expected) and BOE minutes that showed some officials see a case for a rate hike getting stronger have lifted sterling, says the BBH team.
Key Quotes
“The MPC minutes seemed somewhat more hawkish than what is expected from the Federal Reserve minutes, to be released later today. The housing market is a greater concern in the UK than in the US. Carney has suggested addressing it will fall more to the Financial Policy Committee, which meets next month, while Bean, who steps down next month, seemed to suggest a MPC response (rate hike). Note that reports suggest that a UK bank have announced a tightening of mortgage lending standards by capping loan amounts to four times income on purchases more than GBP500k. As Carney has acknowledged, the strong foreign bid is relatively immune from such requirements, largely paying cash. Lastly, we note Bean’s warning that the low volatility that the capital markets are generally experiencing preceded the financial crisis”.
“Sterling is set to extend its advancing streak (NY close basis) for the fifth consecutive session today. Support now is seen near $1.6840-60. On the top side, the $1.70 psychological level beckons, but appears to be too far today”.
“Short-term technical indicators warn that sterling may be a bit stretched, and some consolidation is now likely”.
“For its parts, the euro slipped to almost GBP0.8100, which is a new low since early 2013. It too is a bit stretched from a short-term technical perspective. Resistance is seen near GBP0.8130. The next downside target is seen near GBP0.8080”.
Key Quotes
“The MPC minutes seemed somewhat more hawkish than what is expected from the Federal Reserve minutes, to be released later today. The housing market is a greater concern in the UK than in the US. Carney has suggested addressing it will fall more to the Financial Policy Committee, which meets next month, while Bean, who steps down next month, seemed to suggest a MPC response (rate hike). Note that reports suggest that a UK bank have announced a tightening of mortgage lending standards by capping loan amounts to four times income on purchases more than GBP500k. As Carney has acknowledged, the strong foreign bid is relatively immune from such requirements, largely paying cash. Lastly, we note Bean’s warning that the low volatility that the capital markets are generally experiencing preceded the financial crisis”.
“Sterling is set to extend its advancing streak (NY close basis) for the fifth consecutive session today. Support now is seen near $1.6840-60. On the top side, the $1.70 psychological level beckons, but appears to be too far today”.
“Short-term technical indicators warn that sterling may be a bit stretched, and some consolidation is now likely”.
“For its parts, the euro slipped to almost GBP0.8100, which is a new low since early 2013. It too is a bit stretched from a short-term technical perspective. Resistance is seen near GBP0.8130. The next downside target is seen near GBP0.8080”.