GBP/USD to Test 2010 Low

GBP/USD to Test 2010 Low

GBP/USD to Test 2010 Low

With U.K. CPI, retail sales and employment numbers scheduled for release, sterling is in play this week. Tomorrow, Bank of England Governor Mark Carney will be delivering his first speech on the economy this year. Given the recent slowdown in manufacturing and service sector activity along with the drop in commodity prices, we are looking for inflationary pressures to ease, which should lead to more caution from Carney. At the last central bank meeting, we learned that U.K. policymakers were concerned about market volatility and low oil prices. According to the central bank “Recent volatility in financial markets has underlined the downside risks to global growth” and recent declines in oil “will depress global inflation in the near term.” While they also mentioned that lower commodity prices could boost spending, wage growth will curtail it. Dovish comments from Carney and/or lower CPI could drive sterling to fresh lows versus the U.S. dollar.

Technically GBP/USD slipped to fresh 5 year lows today and appears headed for its 2010 low of 1.4230. This is the closest support level for the currency pair before 1.40. Should GBP/USD retrace, resistance can be found at 1.4400.

Chart Of The Day

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