Risk appetite caused the Sterling to appreciate the most against the safe-haven Yen, with the pair adding 0.60%, while the Pound also managed to outperform most of major currencies yesterday. The British currency also gained 0.42% versus both the Kiwi and the Greenback, while having surged only 0.29% against the European single currency, followed by a 0.22% rally versus the Australian Dollar and 0.21% against the Swiss Franc. Nevertheless, the Sterling suffered a decline against one major currency, namely against the Loonie, due to the Bank of Canada leaving its overnight rate unchanged at 0.5%.
Bank of England Governor Mark Carney defended the central bank's decision to highlight the risks of exiting the European Union, coming under renewed accusation from a lawmaker, who has been attacking Carney brutally on his role in the Brexit debate. Carney said the BoE sees Brexit as the biggest domestic risk to financial stability, and agreed that Brexit could cause the Pound to fall, creating an upside shock to inflation that would make it harder to keep interest rates low. The Governor said that if the UK stays in the EU, the next move in interest rates would probably be up. However, if Britons vote to leave the EU, there is a lower chance of a hike. Deputy Governor Ben Broadbent pointed out that the UK economy appears to have slowed quite sharply this year, while it is unclear how much of the slowdown was °triggered by the Brexit concerns. Jacob Rees-Mogg, a eurosceptic lawmaker, who has previously blamed Carney of venturing into politics with his Brexit warnings and urged him to resign, kept up his criticism. At the same time Andrew Tyrie, chairman of the committee quizzing Carney and other BoE officials, said lawmakers would have criticized the Governor if he had stayed silent on Brexit.
Prime Minister David Cameron and finance minister George Osborne are leading the campaign to keep the country in the EU. The finance ministry has issued similar warning to Carney.
UK GDP Second Estimate and US Durable and Core Durable Goods Orders
GBP/USD on the edge of breaking the 22-month resistance line
The British Pound once again managed to outperform the US Dollar, reaching the 1.47 major level yesterday, where the Bollinger band coincides with the 22-month down-trend. From the technical point of view, we should see the Cable make a U-turn and end the day in the red zone; however, daily technical indicators suggest that a possibility of a bullish outcome exists. In case of a bullish development gains should be limited by the 200-day SMA around 1.4778, whereas in case of the bearish outcome the main target will be the 1.46 psychological level, which contained yesterday's downside volatility.
Daily chart
Hourly chart
Bears now in the majority
Bearish market sentiment returned to its Monday's level of 54%, compared to 56% on Wednesday. At the same time, sell orders are now outnumbering the purchase ones by four percentage points.
At OANDA market sentiment worsened over the day, as bulls and bears reached a perfect equilibrium today, compared to 52% of all open positions being short on Wednesday. Meanwhile, the sentiment at SAXO Bank remained unchanged over the day, as bears still take up 61% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months