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While, the rest of the world worries about plunging oil prices and their impact on economies, Fed Vice Chairman Stanley Fischer and New York Fed President William C. Dudley noted that sharp declines in oil prices will bolster US economic growth by fuelling spending, playing down concerns that falling energy costs may potentially push inflation further below the official goal. The Fed's closely watched gauge of price pressures rose 1.4% in October from the same month a year ago. In addition to that, Dudley confirmed the nation's economy is resilient to withstand rate hike next year, as well as consumer price growth would start to accelerate towards the Fed's 2% inflation goal in 2015.
However, activity growth in the British manufacturing sector accelerated in November to the fastest pace in four months, as domestic demand offset subdued exports due to falling orders form the Euro zone as well as emerging markets. According to Markit Economics, manufacturing PMI climbed to 53.5 in November up from a revised 53.3 a month earlier, with a reading above the 50-mark threshold indicating growth in the sector. The report highlighted the UK's further reliance on domestic demand, as export orders declined for a third consecutive month. Last week, data showed a rise in consumer spending boosted the nation's economy, which enjoyed seven straight quarters of growth in the three months through September.
UK's construction PMI is released on Tuesday
This week once again is full with important data and most likely the volatility levels will be much higher compared to the previous week due to the fact that there will be no bank holidays. Today we are waiting for UK's construction PMI to be released, it is expected to slide slightly, meaning that a surprise to either side could shake the market.{ATTACHMENT}
GBP/USD tests upper trend-line
Already for more than a month GBP/USD is testing the strength of the down-trend, especially its upper trend-line, that started to take its shape at July, when the pair reached a six-year high at 1.7193. The pair's trading range is becoming narrower and that could potentially provoke a break-out. Since the Pound has reached this year's low just recently, we expect a bullish break-out to be the case; however, there still is a downside risk of the pair falling lower, if it fails to breach the monthly S1 at 1.5833.Daily chart
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The GBP/USD cross is strongly supported by the 55, 100 and 200-period SMAs around the 1.57 level. For now it is still unclear whether it will be enough to push the pair above the down-trend's resistance line that is located around 1.5741. However, if the previously mentioned supports fail to keep the pair afloat then the pair most likely will test this years low once again, since the daily and weekly technicals are bearish.
Hourly chart
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