Yesterday, on June 19th, during the American trading session, the British Pound set a new 5-year high at 1,7062. The trading session closet around 1,7034 after the currency pair decided to retrace a little bit after setting the mentioned major low.
Today, on June 20th, during the European trading session, GBPUSD keeps on trading close to the new high. At this point, the price is up by 0,08%.
Meanwhile, experts say that the UK is about to toughen its monetary policy while the Fed is still printing money to buy assets, even though it keeps on tapering the program.
It appears that the biggest problem for the British economy is the current price growth seen in the local housing market coupled with low-cost mortgage lending. This may result in a big-scale price bubble in the market, thereby undermining the prospects of the UK economic recovery in the near-future amid higher interest rates since the amount of failed mortgage payments may eventually increase while some investors are unable to service costlier debts. Despite the Bank of England's intensions to raise interest rates in the near future, market participants were disappointed by the Monetary Policy Committee (MPC) meeting minutes. The minutes show us that 9 MPC members supported low interest rates.
At the same time, the Fed is on its way to monetary toughening as well. Still, the FOMC decided to preserve ultra-easy monetary policy until mid 2015 while downgrading the US economic forecast. Even though the Fed is still printing money to purchase assets, Janet Yellen warns traders and investors that the US stock market may well be misvalued and overpriced. Apparently, this came as a surprise since most market participants had anticipated tougher policies after higher employment and inflation. Still, the inflation hike may well be a temporary phenomenon. The Fed assumes that the rate of inflation is going to stay below the 2% target in the long run.
One of the consequences of the Fed's monetary easing is low volatility across various market sectors coupled with lower US bond yields. The Fed has disappointed investors so the tendency is likely to hold true in the near future.
Yesterday's economic data from the UK turned out to be disappointing. May's retail sales (y/y) declined from 6,5% down to 3,9% a months before while the forecast was 4,3%.
Yesterday's reports from the USA were more reassuring. Philadelphia's business activity index increased up to 17,8.
GBPUSD
Masterforex-V Academy reports about a rally seen in the H1 chart of GBPUSD. Yesterday, the price set a new multi-year high at 1,7062. The price growth confirmed the strength o the existing mid-term and long-term uptrends (marked blue).
GBPUSD is likely to go further up to 1,7085 after breaking the level of resistance close to the 1,7062 high.
Alternatively, the currency pair may start a bearish reaction down to 1,7017. A break below this level of support will give way to 1,6985 and 1,6921 (marked red).
According to the Binary Option Department of Masterforex-V Academy, GBPUSD is showing a mere uptrend. Buying call options is the right option for now. The recommend lifetime of the option is up to 1 hour.
