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The September British Pound is trading lower this morning after the Bank of England left interest rates unchanged as expected. The economy still hasn’t responded enough to various forms of stimuli as government austerity measures seem to have a tight grip on growth. Inflation remains uncomfortably high; however, the central bank has not been willing to raise interest rates because of its possible negative impact on the economy.
Technically, the main trend is down on the daily chart. The new swing top is 1.6125. A trade through this level will turn the main trend up. The next downside target is 1.5894. A trade through this level will reaffirm the downtrend. Besides the series of lower-tops and lower-bottoms, the key .618 level at 1.5840 remains a hurdle. Bottom-pickers seem to be defending this price level indicating that the market is likely to accelerate to the downside should this support fail.
Later this morning the European Central Bank is expected to hike its benchmark interest rate by 25 basis points. This increase has been in the market for almost a month. This news coupled with the passing of the Greek austerity measures helped underpin the market for a few days until weak economic news and a downgrade ofPortugal’s debt encouraged traders to take profits, leading to the current setback.
The weak economic news this week could be significant to future rate hikes. ECB President Jean-Claude Trichet is expected to address this issue. The market seems to be betting that he will likely postpone the next rate hike until October. Expect Trichet to be peppered with questions regarding bailouts.
The daily main trend is up. A new main top has been formed at 1.4547. A trade through 1.4070 will turn the main trend down. A break through the psychological 1.40 level is likely to trigger panic selling and will be an indication that concerns are rising over new sovereign debt problems.
