Yesterday on Friday the British pound lost its value slightly against U.S dollar by around 0.05 percent, closing at 1.21573 with moderate shallow. The pound has seen a dramatic drop by no less than 3.4 percent over the past two weeks. Such slump in pound’s value may be largely attributed by the economic slack of Britain, and rallies in U.S. market showed by recent data.
America’s labor market might not be as great yet as President Trump wants, but by almost any measure, it’s getting better. U.S. hired workers by employers added at a robust pace, with an above-forecast 235,000 positions in February, while measures of joblessness and underemployment improved, the Labour Department’s monthly report showed on Saturday. Unemployment rate (4.7 percent) remained the same as the expectation, while was beaten by the previous. Additionally, wage growth picked up and the share of prime-age Americans in the labor force rose to the highest since 2011, suggesting the economy’s strength is drawing people off the sidelines.
Rising inflation, together with a tighter labor market, stock market boom and strengthening global economy, has left some economists expecting that the Fed could increase rates much faster than currently anticipated by the financial market. “We continue to expect the Fed to raise its policy rate by an above-consensus four times this year,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.
Although Fed Chair Janet Yellen signaled last week that the U.S. central bank would likely hike rates at its March 14-15 policy meeting, there is an expectation that no much impact would be on the financial market since it has already partially absorbed the anticipation of the rate hike.
The British economic slack can be viewed from recent data released, including Industrial Production (YoY) and Manufacturing Production (YoY) in January. Industrial Production, a measure of the manufacturing output of the energy sector, factories, and mines, accounts for about a quarter of overall GDP. It kept unchanged at 3.2 percent compared with forecast, while lower than previous of 4.3 percent. Meanwhile, the expectation of Manufacturing Production of January was set to be 2.9 percent, beating the actual rate released by the government.
Prime Minister Theresa May is set to begin exit talks by the end of the month, kicking off Britain’s most complex set of negotiations since the end of World War Two. The outcome will shape Britain’s political and economic future, and actually cast a cloud over pound’s prospect.
Technically, the value of the pound against U.S. dollar remains in an ongoing trading range, between 1.21331 and 1.21949 regarding 30-minute chart, which is depicted below. Current resistance remains located at the 4 pm March 9 2017 at 1.21949, while its support range is at 5 pm at 1.21450. If it later has a rise to retest resistance for a potential breakout.
Chart 1: GBPUSD 30-Minute
Referring to daily chart, currently short momentum is pointed lower, with exchange rate remaining under the 20 Day MA found at 1.23652. If prices continue to decline this week, traders may look for its rate to return to support at 1.19941 and potentially breakout lower. Alternatively if it remains supported, they may look for the rate to bounce and retest resistance of 1.27697.
Chart 2: GBPUSD Daily
