- The British pound reacted to central bank decisions and U.S. CPI data with choppy trading, but broader dynamics remain unchanged.
- Key resistance and support levels continue to define direction, with relative strength versus peers likely to persist.
The British pound has been very noisy during trading on Thursday, which is not a huge surprise considering that we had the Bank of England interest rate decision during the day. On the other side of the Atlantic, we had the CPI numbers come out of the United States. The English cut their rates as anticipated. The CPI numbers in the United States came in much weaker than anticipated. So this has helped lift the British pound just a touch.
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That being said, I don't know that anything has changed. The interest rate differential, which of course changed when the Federal Reserve cut rates last week, is now gone. And now we have a situation where we have to question whether or not the US starts slowing down, because if the US starts slowing down, typically what follows is the rest of the world slowing down. So you see an initial move against America, only to turn around and run back to America via currency markets and more specifically the bond market, which, of course, is a main driver of the currency market.
Key Levels and Relative Strength Outlook
As things stand right now, it looks like the 1.34 level continues to be massive resistance or more or less a magnet for price. And it's really not until we break above the 1.35 level that I think the British pound has the all clear to go higher. In that environment, we could go looking to the 1.3750 level. Just have to wait and see.
To the downside, if we can break down below the Wednesday candlestick, I think at that point in time, I might start shorting this pair. It could open up a move down to 1.32 and then eventually 1.30 over the longer term. Nonetheless, I would say this about the British pound. It has outperformed most of its contemporaries against the US dollar both up and down over the last couple of years. And I anticipate that to continue being the case here, as the US dollar is the main driver of Forex markets, but it's a relative game and relatively speaking, the pound is stronger than most other currencies.
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