The GBP/USD pair had a strong session on Wednesday as we bounce back above the 1.60 handle. At this point time, it looks as if the market wants to trying to form some type of base in this general vicinity. Quite frankly, was a bit of a surprise to us that the level gave way to the sellers 24 hours ago, but now that we have seen buyers stepped back into the marketplace, we think that the uptrend is ready to continue.
However, you must be diligent and careful in these types of situations, especially when we have a lot of headline risks out there. With this in mind, we want to wait until we see a break above the highs for the session in order to start buying the British pound again. It must be said however, that the British pound did look strong against several other currencies as well during the session, and we may be oversold regardless.
Looking at the central bank action, the Federal Reserve is more than happy to continue to print and it ease its monetary policy while the Bank of England looks to hold its rates and monetary policy where it currently sits. In other words, the interest-rate differential between the two countries should continue to expand, and in the United Kingdom’s favor. This should naturally put a bid in for the British pound, as it is also a safe haven from problems on the continent as well.
The money flowing across the English Channel has been substantial over the last several months, and there doesn’t seem to be any signs of it slowing down. Quite frankly, all you have to do is think as to where you would rather have your money part. Would it be in Brussels, Madrid, or Malan? Or would you feel much more comfortable with been parked in London? Many of the rich in the European Union are asking themselves is very question, and acting accordingly. This makes the British pound a necessity for many of them, and it appears that many of the ultra rich are leaving France as well, which of course drives the Pound higher in relation to the Euro, which is the exact move that we solve today.
Written by FX Empire