- Pound Sterling is heading higher once more as it seeks to recapture ground lost to the US Dollar overnight.
At the time of writing the Pound to Dollar exchange rate is seen at 1.3007 having gone as low as 1.2921 earlier in the day.
The recovery confirms our suspicions that this remains a bullish market and further gains are possible from here.
Analysis from brokers Forex.com shows the breaking of the key handle at 1.30 breaks decisively then there is nothing significant in terms of prior reference points until around the 1.3335-45 area.
"A break up through resistance in the 1.3050-1.3080 region would call this view into question and risk an expansion of the move towards the 1.3500 region," says analyst Robin Wilkin with Lloyds Bank.
This wouldn’t change Wilkin's underlying medium-term outlook of a range, "but rather than being between ~1.20 and ~1.30 we may be moving into a slightly higher range of ~1.25 to ~1.35."
Wilkin notes the exchange rate is still within a clearly defined channel, so a breakdown through 1.2875and 1.2830 supports are needed to suggest a top around 1.30 is developing.
Further evidence of a deteriorating outlook for GBP/USD will only come from a break of 1.2775 daily trend support.
>> Update: Best GBP/USD rate on international payments now seen around 1.2838 with your bank likely to be offering a comparable payment at a rate ranging between 1.2502 and 1.2592. More details here.
US Dollar Looking Firmer as Data Confirms Improving Economy
The Dollar was bid higher overnight as it regained composure and reversed some of its recent falls thanks to the release of some solid US economic data over the course of the past 24 hours.
The GBP/USD crashed to a low of 1.2888 in a move that caught many in the market by surprise.
That the Dollar was looking oversold was also an issue with some concerned analysts warning a rebound was becoming increasingly overdue.
"Perhaps the most surprising move late yesterday was GBPUSD crashing back from the 1.3050 area and GBP underperforming, despite the strength of this week’s data. It is still within current ranges though," says Wilkin.
The message from the May release of US jobless claims data, at a 3-month low, is that the US labour market continues to strengthen.
Moreover, the index of leading indicators added to evidence that GDP growth will rebound after a paltry 0.7% pace in Q1.
The Federal Reserve Bank of Philadelphia’s business outlook survey suggests that US manufacturing has fully reversed its 2015-16 slowdown, and the capital expenditure outlook index signal very strong investment growth in the current quarter.
“The Philly Fed survey is a more reliable indicator for the overall US manufacturing sector than the Empire State survey, which showed weakness in May earlier this week,” says Johnny Bo Jakobsen at Nordea Markets.