The Pound sterling increased on the back of positive construction data out of the United Kingdom that showed acceleration in October to the fastest pace in six years. Little by little, the Uk data is showing signs that the economy is moving forward, although still hampered by high unemployment.
Cable halted the three-day rise over the euro on the European Central Bank (ECB) benchmark rate decision later this week. GBPUSD began to fall after it was suspected the Bank of England would not raise rates at the yearly high of 1.6250. Recently, GBPUSD fell on the rather optimistic outlook from the Federal Reserve last week.
“The data is suggesting that the economy is about as good as it can get,” said Gavin Friend, a currency strategist at the National Australia Bank Ltd. Friend said that the United Kingdom’s economy is looking more positive than those of the United States and Europe.
The eurodollar rallied from a six-week low after a series of manufacturing data in the eurozone expanded for a fourth month in October. This positive data comes ahead of the ECB rate decision.
“We saw some encouraging data on manufacturing in eurozone – that provided short-covering opportunities for investors,” Joe Manimbo of Western Union Business Solutions said. Even with whispers of a potential 26 bps rate cute, Manimbo said that even if no cut is initiated this week that it is likely further monetary easing is in the “not-very-distant future.”
The eurodollar got awfully close to the 1.34 level of the Fibonacci fan, 1.3441. Rhetoric from the ECB will be just as important as the rate decision itself. If there is no rate cut, ECB president Mario Draghi may continue along with the recovery being gradual and subdued. That could trigger sell orders through 1.34. Secondary target on the daily chart sub-1.34 is 1.3305.