Forex Market: GBP/USD daily trading forecast

Yesterday’s trade saw GBP/USD within the range of 1.5719-1.5618. The pair closed at 1.5686, adding 0.32% on a daily basis.

At 9:15 GMT today GBP/USD was down 0.07% for the day to trade at 1.5676. The pair held in a daily range of 1.5672-1.5706.

Fundamentals

United Kingdom

Halifax reported that houses prices in the UK rose in the three months through November by 0.7% compared to the previous three months. Month-on-month, the Halifax House Price Index jumped by 0.4% in November, reversing a 0.4% decline in October and beating forecasts for a 0.3% gain. On an annual basis, house prices were 8.2% higher from a year earlier, compared to 8.8% during the preceding month, marking the lowest growth rate since February.

Interest rate decision

At 12:00 GMT Bank of England is to announce its decision on monetary policy. The benchmark interest rate (repo rate) will probably be left unchanged at the record low level of 0.50%. The rate has been at that level since BoE’s policy meeting on March 5th 2009. The repo rate applies to open market operations of the central bank with other banks, building societies, securities firms etc. Short-term interest rates are of utmost importance for the valuation of national currencies. Maintaining or reducing the repo rate usually leads to a sell-off in the national currency.

At the same time, the pace of BoE’s monetary stimulus will probably be left without change as well, at GBP 375 billion. The asset-purchasing programme, financed by the issuance of central bank reserves was started on March 5th 2009, while the scale of this programme was increased by GBP 50 billion to the current GBP 375 billion on July 5th 2012. The central bank issues new money in order to purchase gilts from private investors, such as pension funds and insurance companies. In case the scale of monetary stimulus is increased (in order to further spur economic growth), this will usually devalue the local currency.

Bank of England kept its growth forecast of 3.5% in 2014, but revised down by 0.2% its projections for 2015 and 2016 to growth of 2.9% and 2.6%, respectively. Extracts from the bank’s Inflation Report, released in November, stated: ”There is a significant probability that inflation could temporarily fall below 1% in the near term. Inflation then rises back to the target by the end of the forecast period as external pressures fade and growth in unit labour costs gradually picks up. There are significant risks either side of this inflation projection.”

“The Committee sets monetary policy to meet the 2% target in the medium term and in a way that helps to sustain growth and employment. The Committee gave guidance in its February Report on how it would seek to achieve the inflation target over the policy horizon. At its November meeting, the Committee noted that the central message of that guidance remained relevant: given the likely persistence of the headwinds weighing on the economy, when Bank Rate did begin to rise, it was expected to do so only gradually and to remain below average historical levels for some time to come. The actual path for monetary policy would remain dependent on economic conditions. In other words, the Committee’s guidance on the likely pace and extent of interest rate rises was an expectation, not a promise.”

The report hinted that borrowing costs may be raised at a later moment than anticipated. According to expectations, the central bank may introduce the first rate hike in almost six years in the spring of 2015, after parliamentary election in May.

United States

The US Labor Department is expected to report at 13:30 GMT that filings for initial unemployment benefits slid to 297 000 in the week ended November 29th compared to 313 000 a week earlier. Continuing jobless claims are expected to have inched up to 2.318 million from 2.316 million in the preceding period.

Pivot points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.5674. In case GBP/USD manages to breach the first resistance level at 1.5731, it may continue up to test 1.5775. In case the second key resistance is broken, the pair could attempt to advance to 1.5832.

If GBP/USD manages to breach the first key support at 1.5630, it may slide and test 1.5573. With this second key support broken, movement to the downside could continue to 1.5529.

The mid-pivot levels for today are as follows: M1 – 1.5551, M2 – 1.5602, M3 – 1.5652, M4 – 1.5703, M5 – 1.5753, M6 – 1.5804.

In weekly terms, the central pivot point is at 1.5696. The three key resistance levels are as follows: R1 – 1.5777, R2 – 1.5908, R3 – 1.5989. The three key support levels are: S1 – 1.5565, S2 – 1.5484, S3 – 1.5353.