GBP/USD – Pound in Holding Pattern as Investors Await BoE Rate Decision

GBP/USD is hovering at the symbolic 1.30 level, up 0.08% on the day. Traders should be prepared for some movement in the European session, as the Bank of England announces its rate decision.

BoE Could Go Either Way

Will he or won’t he? Mark Carney chairs his final meeting as Governor of the Bank of England, and analysts are split on whether the bank will lower the benchmark rate to 0.50% or maintain rates at 0.75%. Just hours before the rate announcement, there is a 45% likelihood that the bank will cut rates, a move which would likely send the pound downwards. Either side in the rate debate can point to economic data that would support its case. Inflation levels have been falling and CPI slipped to just 1.3% in December, well below the BoE inflation target of 2.0%. Retail sales were down by 1% in the three months to December, compared to the previous three months. However, the employment market remains strong, and manufacturing and services have shown some improvement.

Technical Analysis

The pair is testing support at the 1.30 line. Below, there is support at 1.2950, which has held firm since the last week in December. Above, the 50-EMA is close by at 1.3011, followed by resistance at 1.3050. The next resistance line is at the round number of 1.3100.

Pacific Currencies – Daily Summary

USD/CNY

USD/CNY continues to trade sideways, as Chinese banks have been closed for an extended holiday. Currently, USD/CNY is unchanged, as the pair is trading at 6.9363. On Friday, we’ll get a look at key PMI reports for January. The Manufacturing PMI is expected in at 50.1, little changed from last month. This points to stagnation in the manufacturing sector. The services industry is in better shape, with the Services PMI in expansion territory. The index came in at 53.5 in December and the January estimate stands at 53.1 points.

AUD/USD – Aussie Slips to 14-Week Low

AUD/USD has lost ground in Thursday trading. The pair is currently trading at 0.6724, down 0.43% on the day. The struggling Aussie is at levels not seen since mid-October. In economic news, CPI gained 0.7% in the fourth quarter, up from 0.6% in Q3. However, the solid reading didn’t lift the Aussie, as investors remain concerned about the coronavirus. In economic news, Import Prices improved to 0.7% in Q4, up from 0.3% in the third quarter. On Friday, Australia releases PPI, which is expected to tick lower to 0.3% in Q4, compared to 0.4% in Q3.

 NZD/USD

NZD/USD is down over 1 percent this week, as the China coronavirus has sapped investor risk appetite. Currently, the pair is trading at 0.6505, down 0.33% on the day. In economic news, New Zealand posted a trade surplus in December of NZ$547 million, ending a nasty streak of five successive trade deficits. Still, this wasn’t enough to attract investors, who are shying away from risky currencies like the New Zealand dollar.