Trading Volatility on GBP/USD
Cable has been in a protracted bear trend since it broke the psychological barrier of 1.5000 last December. More recently however it has been showing signs of a correction after having been driven to extremely oversold levels. Since it reached a recent low of 1.41245 on 20th December it has managed to gain back some ground to current levels above 1.44500.
Sterling’s demise came as the Bank of England (BoE) made a U-turn in the possibility of raising interest rates while the US went ahead and raised rates in December. This created a scissor effect given the higher interest rate scenario in the US and the now continued low interest rate scenario for the UK.
The outlook for the UK economy however does not seem to be as strong as once thought. Manufacturing production figures released in December and January both came in with negative numbers -0.1% & -1.2% respectively. Industrial production released in January was also negative and lower than expected at -0.7%.