The GBP/USD surged on Wednesday, climbing to its highest level since early March following unexpected dissent at the Bank of England.
The GBP/USD traded at 1.5065 in the European session, up around 140 pips from its previous open. The pair has made strong inroads over the last several weeks, capitalizing on a mostly weaker US dollar. The daily support is located at 1.4921. On the upside, the next major resistance test for the GBP/USD is likely 1.5148.
The US dollar was little changed against a basket of currencies on Wednesday. The dollar index declined 0.1% to 97.89.
The UK had no economic data to report on Wednesday, as the markets shifted their attention to the minutes of the April 7-8 Monetary Policy Committee. The MPC voted unanimously to keep interest rates at record lows, but were divided on their assessment of monetary policy. Two members said their decision to vote down a rate increase was “finely balanced,” suggesting they could be open to voting for a rate increase in the coming months. Policymakers also expressed more confidence in the economic recovery, believing it would eventually pave the way for higher inflation and earnings growth.
The MPC has held interest rates at 0.5% for the duration of parliament. That’s the longest stretch since the Second World War. Britain heads to the polls on May 7 in what many say will be the closest elections in decades.
The Office for National Statistics (ONS) will report on retail sales and public sector net borrowing on Thursday. UK retail sales are forecast to rise 0.4% in March, reaffirming the consumer-led recovery. Compared to March of last year, sales are expected to increase 5.4%.
The ONS will release official first quarter GDP figures next week.
The British pound was supported across the board on Wednesday, rising against the euro, Japanese yen and Swiss franc.
The EUR/GBP plunged 0.9% to 0.7126. The pair is testing the 0.7125 support level. On the upside, initial resistance is likely found at 0.7213.
The GBP/JPY surged 0.8% to 180.07. It faces support at 177.77 and resistance at 179.19.
The GBP/CHF gained nearly 2%, climbing to 1.4517. The pair is trading in extremely overbought territory, according to the technical indicators.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.