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GBP/USD hits five-year high

The cable’s ten-month rally has once again taken it back above $1.6900 and a short distance from its August 2009 highs.

All trading involves risk. Losses can exceed deposits.

This morning saw the release of UK manufacturing purchasing managers index figures that have once again returned to their January highs. The overall picture of the state of the UK economy’s health has been improving. This is clearly shown by the general perception that the Bank of England and governor Mark Carney will be forced into moving up their timetable for increasing the UK base rate.

The last couple of days have also seen US gross domestic product figures miss their mark, with growth coming in at 0.1% rather than the expected 1.2%. Last night we also heard from the Federal Open Market Committee, as they confirmed they were trimming a further $10 billion from the monthly debt purchasing scheme. This latest action now takes its monthly figure down to $45 billion and if this rate of descent continues, it could be down to nothing by the end of the year.

The last three trading days have seen GBP/USD add over 100 pips as it has finally managed to break away from the magnetic effects of the $1.6800 level. In doing this GBP/USD has now moved into overbought territory on the 10-day relative strength index.

Having had such a strong run over the last ten months and moving into overbought territory, we could be looking for a correction in the not too distant future before an extended run above $1.70 can be achieved.

GBP/USD chart

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