Forex

GBP/USD Strengthens as BOE Maintains Rate

The GBP/USD was mildly supported on Thursday as the Bank of England made no changes to monetary policy, as investors continued to monitor negotiations betw

The GBP/USD was mildly supported on Thursday as the Bank of England made no changes to monetary policy, as investors continued to monitor negotiations between Greece and its creditors over a new bailout agreement.

The GBP/USD climbed to a daily high of 1.5446 in the European session only to settle well below 1.5400 later on in the day. The GBP/USD consolidated at 1.5367, advancing 0.2%. The pair faces initial support at 1.5304, the daily low, and resistance at 1.5446, the daily high.

The Bank of England kept interest rates at a record low of 0.5% and the size of the asset purchase facility at £375 billion, as expected. The Bank’s Monetary Policy Committee has held rates at record lows for more than six years, as policymakers continue to play it safe amid very weak inflation. Annual inflation turned negative in April, falling 0.1%.

According to the Bank’s quarterly inflation report, interest rates will likely remain at record lows until the middle of next year.

The BOE will release its 12-month inflation expectations on Friday.

In economic data, US jobless claims fell more than forecast last week, adding further evidence of an improving labour market. Jobless claims declined by 8,000 to a seasonally adjusted 276,000 in the week ended May 30, the Department of Labor reported on Thursday.

The Labor Department on Friday is expected to show the creation of around 220,000 jobs in May, according to economists. Nonfarm payrolls increased by 223,000 in April.

The pound was also supported against the euro, as the EUR/GBP fell 0.2% to 0.7335. The pair faces immediate support at 0.7272 and resistance at 0.7390.

The euro has enjoyed strong support this week after reports showed that Greece’s creditors had submitted a final bailout proposal. However, Greece has reportedly rejected the deal and is in the process of formulating a counter-offer. The far-left Syriza government has vowed it would not be “blackmailed” into accepting an agreement.

Greece is on the hook for a €310 million payment to the International Monetary Fund on Friday. The IMF believes that Greece would not be able to meet its loan obligations without a newly structured deal, which must be reached by the end of June.

 

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