GBPUSD Edges Higher in Thin Holiday Trade

The British pound has posted slight gains on Monday, erasing the losses seen on Friday. It has been a rough run for the British pound which has posted three consecutive bearish weeks so far. The pound has slid 6% since April high of 1.4376 and the pair dropped below the 1.35 line on Friday for the first time since early January. In addition to a broadly stronger US dollar, recent weak British numbers have soured sentiment towards the pound. However the pair has bounced back above 1.35 handle and remained above 1.3500 which is viewed widely in the market as a huge psychological support.

GBPUSD Off to Slow Start for the Week

British banks were closed on Monday and there was no major market impact news from UK on Monday. The pair recovery from Friday’s losses can be viewed as influence from investors expectations that the Bank of England will raise interest rates on Thursday. However the market is divided on the rate hike sentiment as many analysts expect the BOE to delay a hike until the second half of the year, with August or November being the most likely months for a rate hike. The dynamics in GBP/USD continues to remain downright volatile since bearish decline started off mid-April.

Traders are on look out for House price index data in UK’s market before placing short term bets; the calendar doesn’t have any other major to offer until coming Thursday. When looking at US calendar, Fed Chair Powell is expected to speak in an Event in Zurich & JOLTS job opening data release scheduled later today. Thus far US dollar has remained strong since gaining momentum from Spike in Treasury yields which occurred last month and gained further support from positive macro economic data the calendar has offered so far.  Investors await BOE’s interest rate update on Thursday before placing any major  long term bets. Expected support and resistance for the pair in short term are at 1.3510 / 1.3485 / 1.3450 and 1.3610 / 1.3645 / 1.3690 respectively.