GBP/USD Currency Pair Monday 2 November 2015

The GBP/USD currency pair opened the day at 1.5457 and peaked at 4:30 AM when it hit 1.5497. The pair subsequently retraced to 1.5405 at around 2:15 PM yesterday. Late trading activity was boosted by GBP sales and dollar purchases. The GBP/USD currency pair has a 52-week trading range of 1.4566 on the low end and 1.6023 on the high end. At its current exchange rate, the GBP is trading strongly, despite a slight pullback late in the afternoon. The year-to-date return for this currency pair is -1%, which is an impressive performance given the strength of the USD in 2015. As cases in point, consider the year-to-date return on other currencies against the dollar:

Had you placed call options on the USD against the EUR, AUD, GBP or NZD, the likelihood of an appreciation for the year-to-date would have been positive. However, currencies can fluctuate wildly at any given time, owing to a huge number of variables such as interest rates, PMI for services and manufacturing, geopolitical uncertainty, GDP data, inflation data and the like. There is no doubt however that heading into November the USD has been a star performer in the currencies arena.

The GBP/USD Pair – An Interesting Pair

It is clear from yesterday’s trading data that the 1.55 level is a ceiling for the GBP. To move beyond that level, the Sterling has to do something spectacular. Throughout October there were several attempts by the GBP to break through that resistance level. Yesterday, the GBP came close to breaching the 1.55 level after advancing from 1.5241 through 1.5350, rising above the 50-day moving average and the 200-day moving average.

My gut feel is somewhat bearish regarding the GBP. And I say this with all due respect to the queen’s currency. On December 15/16 we are going to have another Fed FOMC meeting which will ultimately decide whether the Fed will raise interest rates above the current level of 0.25%. Given what we have just witnessed with the last Fed statement, there is enough evidence to suggest that a rate hike is forthcoming. Now whether it comes in the next six weeks or beyond is anybody’s guess. However it is precisely that uncertainty that will keep the GBP at bay, and keep the dollar in contention to end the year stronger than it began the year against the Sterling.