GBP/USD drifted lower in overnight trading as the dollar’s strength shined through again. Last week the greenback experienced two major pull backs after the Federal Reserve suggested it was in no hurry to raise interest rates, but now that the has dust settled traders’ preference is still with the dollar.
As I previously noted, the US is tipped to increase interest rates this year, and this will ensure the pound’s downward trend versus the dollar remains.
It is a quiet day in terms of economic announcements from the UK today, but the CPI report tomorrow will provide us with an idea of what the Bank of England’s next move will be. Inflation in the UK is already low, and the market is expecting it to drop to 0.1% in February. Mark Carney has already stated he would cut interest rates if necessary, and a new wave of GBP/USD selling will be triggered should tomorrow’s figures undershoot forecasts.
The $1.49 level is acting as support and if this mark is punctured it will become resistance. The 200-hour moving average of $1.4847 will be the first target and a move beyond that will bring $1.48 into play. If $1.49 is held the first level of resistance will be encountered at the $1.4945-50 region, and if that is cleared then $1.50 will be the next target.