The British currency retained most of it strength on Tuesday, having outperformed most major peers that day. Amid the return of risk appetite, the Pound experienced the largest gain against the Yen, namely 1.20%. Another significant rally of 0.84% was registered against the US Dollar, followed by a 0.60% gain versus the Swissie and 0.45% versus the Euro. At the same time, the Sterling remained relatively unchanged against the Aussie and the Loonie, surging only 0.01% and falling 0.05% lower, respectively. The only significant decline was detected against the Kiwi, which in turn strengthened due to a strong reading of the GDT Price Index yesterday.
Bank of England Governor Mark Carney took a chance to voice a fresh set of concerns about threats the UK economy may face should voters choose to exit from the European Union. In testimony to lawmakers in the House of Lords Carney said that a vote in favour of leaving the EU could result in "an extended period of uncertainty about the economic outlook" in the UK, with the potential to hurt trade, investment and growth. It could also undermine asset prices and the supply of credit in the economy, as well as make it more expensive for Britain to finance the gap added. Carney has previously described Brexit as the main domestic risk to Britain's financial stability. The Governor also stressed the benefits for Britain's economy from its open trading relationship with the EU, drawing criticism from some pro-Brexit lawmakers.
At the same time, Michael Gove, a senior government minister who supports Brexit, described a list of potential gains to the UK of leaving the bloc, including reducing red tape and savings from no longer having to pay into the EU budget. Gove added that the UK would also be able to freely pursue its own free-trade deals with the rest of the world and could be confident the EU would still want to trade freely with Britain, given that the UK was the destination for some 300 billion pounds of EU exports in 2014.
UK labour data and US Existing Home Sales are the main events today
GBP/USD attempts to climb over 1.44
The Us currency weakened on Tuesday, allowing the British Pound to take the upper hand once more and reach the 1.44 mark over the day. A break out of the falling wedge pattern implied that more bullish momentum was likely to follow, with the Cable aiming towards the resistance line at 1.45. Today only one resistance cluster separates the GBP/USD currency pair from reaching that goal, formed by the Bollinger band, the 100-day SMA and the weekly R2. However, we should not rule out the possibility of the exchange rate returning below 1.4350, with the nearest support represented by the weekly R1.
Daily chart
Hourly chart
Sentiment remains bullish
Market sentiment remains bullish, but taking up 56% of the market, compared to 57% yesterday. At the same time, the portion of orders to acquire the Sterling increased from 36 to 59%.
At OANDA market sentiment is now close to equilibrium, with only 51% of their open positions being long, compared to 57% on Tuesday. Meanwhile, the sentiment at Saxo Bank remains bearish, with 57% of their traders now holding short positions (previously 55%)..
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months