The Cable is holding strong above May lows and is battling its psychological 1.45 level as the Pound outperforms the Euro, highlighted by a steep decline in the EUR/GBP. The Pound’s relative strength could be stemming from comments issued by the OECD encouraging the BoE to raise rates by the end of the year if it wants to keep inflation under control. We’ve previously noted the incessant rise in UK inflation over the past months. The BoE has brushed the readings aside as a temporary trend, though the OEC doesn’t seem to buy it. Hence, speculation that the BoE could be under pressure to raise rates sooner than anticipated has helped the Cable perform well over the past 24 hours. However, the OECD’s comments directly contradict the BoE’s expectation of deflation in its recent inflation report. Therefore, we’ll have to see whether the BoE changes its stance. If not, the Pound’s relative strength could fade over time. BBA mortgage approvals printed below analyst expectations yesterday and investors are currently waiting on CBI realized sales. Solid consumption data could help boost the Cable, although the currency pair may opt to follow general movements in the risk trade. More emphasis will likely be placed on upcoming U.S prelim GDP data. UK nationwide HPI is due for a tentative release, though fiscal issues in the EU and U.S. data should take main stage for the rest of the week.
Technically speaking, the Cable faces multiple downtrend lines along with intraday and 5/14 highs. Additionally, the psychological 1.45 area could continue to serve as a solid barrier should it be tested. As for the downside, the Cable has support in the form of intraday and 5/20 lows. Furthermore, the psychological 1.42 level could serve as a technical cushion if it’s reached.
Present Price: 1.4477 Resistances: 1.4498, 1.4521, 1.4543, 1.4584, 1.4626, 1.4671 Supports: 1.4432, 1.4409, 1.4387, 1.4359, 1.4326, 1.4301 Psychological: 1.42, 1.45, May 2010 and February 2009 lows