GBP/USD: headed back below 1.42 handle, eyes now on break of 1.4080?

The US dollar has made a comeback as markets figure the divergence between the Fed and others playing catch up is still wide despite the disappointment of there being only three hikes on the Fed's dot plot for 2018. Currently, GBP/USD is trading at 1.4099, down -0.29% on the day, having posted a daily high at 1.4221 and low at 1.4076.

It has been a pretty action-packed week for the pound so far, what with the initial Brexit news at the start of the week that gave the pound a boost, propelled higher by weakness in the dollar and markets taking out the positive as a whole from a mixed set of data releases from the UK. 

White House mayhem: VIX spiking, but dollar higher, stocks and USD/JPY recovering from major sell-off

Today's markets were trading off the UK Feb retail sales beat that sent the pound to 1.4179 the high straight off the bat - (The data arrived up 0.8% vs 0.4% forecasted. Jan was revised down 0.3%. 1.5% y/y vs 1.3% f/c). However, cable rallied further on the BoE decision, meet=ing the aforementioned high before a rebound in the DXY sent cable into a drift to the rising 50-hr SMA. at 1.4081.

BoE sends cable through the roof on knee-jerk to 1.4221

"The Bank of England maintained monetary policy unchanged but two BoE members (Ian McCafferty and Michael Saunders) voted for an immediate rate hike (vote count 7-2 for an unchanged Bank Rate). While Mark Carney has already revealed that the BoE no longer wants to pre-commit to a hike, this was as close to a pre-commitment as we could get," noted analysts at Danske Bank. Meanwhile, analysts at Rabobank explained that there wasn’t much new in the policy statement. "Given the market’s strong beliefs about a rate hike in May, we would argue that the Bank’s silence gives consent."

GBP/USD levels

"The broader undertone of this market is constructive – sustained gains through bull breakout resistance and 40-day MA – and technical signals are aligned bullishly across short, medium and longer run oscillators," - analysts at Scotiabank argued.  The 200-week moving average is located at 1.4288 and remains a key target through 1.4220. Spot at 1.4111 and low at just below 1.4080, 1.40 the figure comes next and ahead of 1.3890/08 as the 21-D SMA. Lower to 1.3840 guards the Feb 9th low is at 1.3765.