GBP/USD Range Snaps, RSI Remains Extreme Ahead Of BoE, FOMC Rhetoric

BRITISH POUND TALKING POINTS

GBP/USD snaps the range from the previous week following a bulk of data coming out of the U.K. & U.S. economy, and fresh rhetoric from Bank of England (BoE) and Federal Reserve officials may largely influence the exchange rate over the coming days as market participants weigh the outlook for monetary policy. Recent price action keeps the near-term outlook tiled to the downside as the Relative Strength Index (RSI) continues to flash an extreme reading, with the momentum indicator still trading in oversold territory.

Image of daily change for major currencies

GBP/USD SNAPS RANGE AHEAD OF BANK OF ENGLAND (BOE), FEDERAL OPEN MARKET COMMITTEE (FOMC) RHETORIC

Image of daily change for GBPUSD

The limited reaction to the 197K expansion in U.K. employment suggests the figures were largely overshadowed by the 31.2K rise in claims for unemployment benefits, with the mixed prints for Average Weekly Earnings likely to keep the Bank of England (BoE) on the sidelines at the next meeting on June 21 as ‘inflation is projected to fall back slightly more quickly than in February.’ In turn, BoE Chief Economist Andrew Haldane may largely tame expectations for an imminent rate-hike as the Monetary Policy Committee (MPC) member is scheduled to speak later this week, and a slew of dovish rhetoric may generate headwinds for the British Pound as Governor Mark Carney and Co. appear to be in no rush to further normalize monetary policy.

Image of Fed Fund Futures

In contrast, the 0.3% expansion in U.S. Retail Sales paired with the unexpected uptick in the Empire Manufacturing survey is likely to keep the Federal Open Market Committee (FOMC) on course to deliver higher borrowing costs over the coming months as it instills an improved outlook for growth and inflation. As a result, a growing number of FOMC officials may adopt a more hawkish tone as San Francisco Fed President John Williams, Atlanta Fed President Raphael Bostic, Cleveland Fed President Loretta Mester and Governor Lael Brainard are all slated to speak over the remainder of the week, and the fresh comments may heighten the appeal of the greenback should the 2018-voting members show a greater willingness to implement four rate-hikes in 2018.

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