Wednesday November 10, 2010 - 14:21:51 GMT
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Forex Hound - www.forexhound.com
Fundamentals, Technicals Drive British Pound Higher
The British Pound strengthened this morning after the Bank
of England said inflation may continue to accelerate above its 2 percent
target, reducing the chances that the central bank will reignite asset purchases.
Overnight the BoE said its officials are having a â€śvigorous
debateâ€ť over the risks of inflation. In its inflation report, the central bank
said near-term inflation is expected to be higher than in August, and consumer
price growth above its target through 2011.
Bearish traders got spooked a little following the report,
triggering a mild short-covering rally. While the report was enough to
establish support, buying wasnâ€™t strong enough to mount a significant challenge
against the recent top.
Based on this morningâ€™s action, it looks as if the BoEâ€™s
â€śwait and seeâ€ť monetary policy approach is not likely to change until the
central bank gets a chance to assess further economic releases. After Tuesdayâ€™s
sell-off, it looks as if this morning traders are only making position
adjustments to reflect the central bankâ€™s attitude.
Technically, the GBP USD is trading higher after testing an
important 50% level at 1.5974. In addition, it held yesterdayâ€™s low at 1.5951.
An uptrending Gann angle at 1.5950 forms a support cluster at 1.5951 to 1.5950.
A failure to hold this zone is likely to trigger a break to the .618 level at
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