The GBP/USD plunged to more than four-and-a-half year lows last Friday, as monetary policy speculation outweighed disappointing US economic data and lifted the dollar to new highs. With the Federal Reserve scheduled to meet later this week, the dollar is expected to maintain its bullish upside, although the GBP/USD is forecast to take a breather following last week’s rout.
The GBP/USD was steady at 1.4750 in Monday’s early Sydney session. The pair faces near-term support at 1.4665 and resistance at 1.4866.
The Commerce Department will report on US housing starts and building permits for February, key gauges of the housing recovery. Housing starts decreased 2 percent in January, as demand for single-family homes cooled from December’s nearly seven-year high.
The Office for National Statistics will release UK employment data for February. The number of workers receiving unemployment benefits declined by 38,600 in January, underscoring Britain’s broad labour market recovery over the past year-and-a-half. The ILO unemployment rate was 5.7 percent in the three months through January.
The ONS will also release earnings data alongside the official employment figures. Average earnings excluding bonuses advanced only 1.7 percent annually in the three months through January, official data revealed last month. Including bonuses, average earnings rose 2.1 percent.
Separately, The Bank of England will release the minutes of its March policy meetings, which resulted in no change to monetary policy. The minutes are expected to reveal another 9-0 vote in favour of maintaining the status quo. That would mark the third consecutive unanimous vote on interest rates after Monetary Policy Committee members Weale and McCafferty voted to raise interest rates in the previous five meetings.
In the United States, the Federal Open Market Committee will wrap up its two-day monetary policy meetings in Washington. While no change to the benchmark lending rate is expected, the Fed could drop the word “patient” from its official rate statement, signaling that policymakers are warming to the idea of a midyear rate hike.
In his final speech as President of the Fed Bank of Dallas, Richard Fisher urged his colleagues to raise interest rates promptly in order to facilitate a gradual rate normalization timetable.
“The idea that we can substitute a steeper future funds-rate path for an early liftoff seems risky to me,” Fisher said earlier this month at the University of Houston. “I would rather the FOMC raise rates early and gradually than late and steeply.”