Pound/dollar is trading above 1.33, closer to the upper end of the 1.3030 to 1.3320 range that characterizes it during long weeks. However, the driver is the weakness of the dollar.
The meeting minutes by the FOMC revealed that a few members “oppose” a rate hike and many are becoming more concerned about the absence of inflation. The text echoes Yellen’s recent speech in which she suggested that low inflation is not transitory. That is the dollar story, and it’s not that great.
What about the pound? The UK released an update on Q3 GDP. The headline figures remain unchanged: 0.4% q/q growth and 1.5% y/y. This is slower than in the euro-zone and also the US but not really news.
The weaker point comes from the construction sector. The GDP data confirms what we already learned from the construction PMI. Britain’s construction sector is in recession.
A second consecutive quarter of downfalls for this important part of the economy is not good news. Will the malaise spread to other sectors? It remains an open question while the rest of the world is growing.
But for the pound/dollar, it means that the rally has stalled. The yen and the euro are clearly taking advantage of the dollar drop, but not Her Majesty’s currency.
More: GBP: Where To Position Ahead Of The Important EU Summit On Dec 14-15 – Nomura
Support awaits at 1.3270, followed by 1.3230. Resistance above 1.3320 awaits only at 1.35. Here is the four-hour cable chart: