GBP/USD tests 50-DMA
Last week saw GBP/USD flirt with hitting a new five-year high; this did not happen in the end, however. In the run up to yesterday’s UK inflation report, markets had begun to factor in chances of the Bank of England timeline for raising interest rates being brought forward. Somewhat surprisingly though, in the end this was not the tone that Mark Carney set. Instead he stated that when rates did rise they would do so at a slow pace and then be maintained at an historical low for some time.
Forward guidance has been the key backbone of the BoE’s policy since the Canadian took over, and he has now created a track record of sticking to his guns. In view of this, it looks unlikely that the central bank will suddenly surprise the markets without first giving it due warning.
Now that the pairing’s rate has dropped by 250 pips and is currently resting just above the 50-day moving average, drifting towards the longer-term trend line and edging towards oversold on the RSI, we might see levels tempting enough for the buyers to come back to the market.