Sterling declines as BOE raises UK growth forecast
The sterling declined slightly after the Bank of England (BOE) delivered its interest rates decision. As expected, the bank left interest rates unchanged and raised the growth forecast for the country. The bank now expects the economy to grow by 1.5% this year, up from the February’s forecast of 1.2%. It expects the unemployment rate to decline to 3.5% by 2022. The decision to leave rates unchanged is due to the uncertainties brought about by Brexit. This uncertainty has meant that local and international businesses are reluctant to invest in the UK.
The euro struggled for direction against the USD after the release of mixed data from Europe. In Germany, the retail sales declined by minus 2.1% in March. This was much lower than the expected growth of 2.9%. In Spain, the manufacturing PMI rose to 51.8, which was higher than the expected 51.2. In Germany, the manufacturing PMI declined to 44.4 from the previous 44.5 while in the EU, the PMI increased to 47.9.
The USD was relatively unmoved after the Fed delivered its interest rates decision. The bank decided to leave rates unchanged and indicated that it will not hike this year. Today, data from the Labor Department showed that the initial jobless claims remained unchanged at 230K. This was worse than the consensus estimates of 220K. The continuing jobless claims increased to 1,671K, up from the previous 1,654K. On a positive side, the nonfarm productivity rate increased by 3.6% in the first quarter. These numbers came a day before the official employment data.
The EUR/USD pair declined sharply after the Fed delivered its verdict on the economy. It reached a low of 1.1187. Today, the pair struggled to recover but reached a high of 1.1218. On the hourly chart below, the pair’s price is along the middle line of the Bollinger Bands. The Standard Deviation indicator has been declining while the accumulation/distribution indicator has declined sharply. The pair is likely to remain along these levels until the employment numbers are released tomorrow.
The GBP/USD declined after the BOE delivered its interest rates decision. It is now trading at 1.3045, which is lower than the intraday high of 1.3080. On the hourly chart, the price is between the lower and middle line of the Bollinger Bands. It is also slightly higher than the 61.8% Fibonacci Retracement level. The on-balance volume indicator has moved slightly lower. Like with the EUR/USD pair, the GBP/USD pair will likely remain along these levels ahead of the US NFP data.
The USD/CHF pair rose sharply after the Fed interest rates decision yesterday. Today, the pair was little changed even after weak PMI data from Switzerland. On the hourly chart, the pair is trading at 1.0188, which is along the important resistance level shown below. It is also slightly higher than the 50-day and 25-day moving averages. The Market Facilitation Index has remained significantly lower after a sharp gain yesterday. The pair could remain along these levels as traders wait for the employment numbers tomorrow.