On Thursday (June 13), at the end of the New York trading session, the British Pound closed higher against the U.S. Dollar at 1.5704, after earlier reaching a four-month high of 1.5736. The rise in the Pound came as market participants lowered expectations for the Bank of England to initiate further economic stimulus measures, with cautious optimism regarding the recovery of the UK economy. Analysts also noted that the current movement of the Pound is driven by the decline in the U.S. Dollar index, following investors reducing their bullish positions on the Dollar as they increasingly questioned whether the Federal Reserve would scale back its stimulus efforts.
Michael Sneyd, a foreign exchange strategist at BNP Paribas, stated: “The Pound is rising due to better UK data and a falling Dollar. The movement of the Pound against the Dollar is currently primarily driven by short-covering activities, especially as investors reduce their bullish positions on the Dollar.”
On Friday (June 14), attention will be on the U.S. industrial production month-on-month for May and the preliminary June consumer sentiment index from the University of Michigan. If the data exceeds expectations, it will boost market expectations of the Federal Reserve tapering its quantitative easing sooner, which would be favorable for the Dollar and put pressure on the Pound.
From a technical perspective, on the daily chart, the exchange rate hovers around the 200-day moving average support at 1.5700. If it can effectively maintain above this moving average, the exchange rate is likely to continue rising, with a target resistance at the 200-week moving average of 1.5790.
