- Today's BoE event fuels the British pound's rally.
- US Dollar Index slumps below 96.50 following the PMI data.
- GBP/USD adds more than 200 pips on the day.
After dropping to a 10-week low at 1.27 on Wednesday, the GBP/USD pair staged an impressive recovery on Thursday and gained more than 200-pips as positive remarks from the BoE Governor Carney boosted the demand for the British pound in the second half of the day. As of writing, the pair was adding 205 pips, or 1.6%, on the day at 1.2970.
As expected, the Bank of England decided to keep the policy rate unchanged at 0.75% in a unanimous vote today. While delivering his remarks on the monetary policy outlook, Governor Carney hinted at slightly faster future hikes in interest rates given the UK reaches an orderly Brexit deal with the EU. “Since the nature of EU withdrawal is not known at present, and its impact on the balance of demand, supply and the exchange rate cannot be determined in advance, the monetary policy response will not be automatic and could be in either direction,” Carney further added.
Commenting on the sterling's price action today, "If Brexit talks fail the BoE will surely provide a large liquidity cushion to the UK economy, but that scenario is months away Meanwhile each hint at a resolution, as in yesterday's reported financial agreement, will propel the GBPUSD higher. Sterling risk is on the upside," argued FXStreet Senior Analyst Joseph Trevisani.
On the other hand, the US Dollar Index failed to extend its rally on Thursday as the greenback suffered heavy losses against its major rivals. Today's data published by the IHS Markit and the ISM both showed that the Trump administration's trade policy continued to impact the manufacturing sector negatively. The DXY, which rose to its highest level in more than a year at 97.20 on Thursday, was last seen down 0.7% on the day at 96.40.
Technical outlook
The pair could face a stiff resistance at 1.3000 (psychological level/100-DMA) ahead of 1.3045 (Oct. 23 high) and 1.3100 (Oct. 19 high). On the downside, supports are located at 1.2870 (Oct. 24 low), 1.2765 (daily low) and 1.2700 (Oct. 20/31 low).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD extends gains above 1.0700, focus on key US data
EUR/USD meets fresh demand and rises toward 1.0750 in the European session on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold closes below key $2,318 support, US GDP holds the key
Gold price is breathing a sigh of relief early Thursday after testing offers near $2,315 once again. Broad risk-aversion seems to be helping Gold find a floor, as traders refrain from placing any fresh directional bets on the bright metal ahead of the preliminary reading of the US first-quarter GDP due later on Thursday.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price.
US Q1 GDP Preview: Economic growth set to remain firm in, albeit easing from Q4
The United States Gross Domestic Product (GDP) is seen expanding at an annualized rate of 2.5% in Q1. The current resilience of the US economy bolsters the case for a soft landing.