When I left for my vacation, the GDP/USD rate closed around the 1.5379 level. I’m back and it’s at the same level. According to recent data, GDP/USD is trading at 1.5397. For 2 weeks the pound has been in a sideways trend. Only on Wednesday, 25th February, did the bulls break the 1.5475 resistance. Having lifted 75 points above resistance, the GDP/USD rate returned to 1.5384 after the release of American reports in which inflation and orders for durable goods were higher than expected.
Before the publication of a GDP report on Friday, the pound/dollar reached a 3-day minimum, before returning to 1.5445. The pound reacted by dropping 45 points on the updated GDP information for Q4. When the euro/pound cross headed back down, the pound/dollar hit a maximum.
The US economy in Q4 of 2014 grew by 2.2% (YOY). The second assessment turned out to be lower than the first (2.6%), but more than forecasted (2.1%). Additional support from the dollar came from the Reuters/Michigan US consumer confidence index. The index increased from 93.6 to 95.4, exceeding the forecasted 94.0.
Uncompleted deals for the sales of housing turned out to be less than the forecasted 1.8% and had grown by only 1.7%. Here it’s worth pointing out that the indicator for December of last year was reassessed and increased from -3.7% to -1.5% (a positive for the US dollar).
On Monday the market opened with a decrease for the British pound. Dollar growth throughout the market was caused by the People’s Bank of China’s decision on 28th February, whereby its press office made a statement saying the bank would reduce base rates for credit and deposits from 1st March by 0.25% to 2.5%. The interest rate for credit in yuan was reduced to 5.35% annual.
Currently, the pound/dollar has dropped to 1.5391 and is sitting on its hour trend line. The sellers are able to break the line, but, taking into consideration that today is Monday, I reckon there’ll be a snap back to the LB line and the pair won’t leave the boundaries of its 5-day price range.
A flash of volatility can be expected following the release of UK business activity in the industrial sector.