April 7, 2010
V for victory! The pound successfully pulled up from its sharp dive against the greenback and etched a nice V-formation on the GBPUSD 1-hour chart. The question is: Would the pound be able to sustain its rally or would it resume its dive later on?
Earlier during the day, UK Prime Minister Gordon Brown announced that the general elections will be held on May 6. This caused fears of a hung Parliament, wherein no political party holds majority of the seats, to resurface. A hung Parliament - no connection to William Hung whatsoever - is an unfavorable political situation since split decisions between the House members could delay important government decisions.
Fortunately for the pound, UK's construction PMI came in better than expected. The March reading climbed from 48.5 to 53.1, past the 50.0 mark which indicates that the industry is expanding. This marks the indicator's 2-year high as new orders for housing and commercial sectors surged in March. As a result, the GBPUSD landed back above the 1.5200 mark and climbed higher after the US Fed delivered skeptical comments concerning their monetary policy.
It'll be the services sector's turn to release their March PMI reading today at 4:30 am GMT. The PMI could dip from 58.4 to 58.1, implying that the expansion in the industry slowed a bit during the month. A weaker than expected figure could force the pound to return its recent gains.
"The only cable I watch is the pound baby."