By DailyFX – GBPUSD.Interest Rate Optimism.Unanimously voting to keep rates at the current 4.50 percent level,central bankers made no mention of any further considerations of… … near
term cuts in the benchmark. Fueling bullish sterling sentiment, further
pushes higher in the underlying currency were bolstered by continued
mentions of rising energy prices and inflationary concerns as consumer
price increases remain high on the year. As a result, market players
boosted the underlying with expectations now residing over a stable repo
rate or even future hike considerations. Confirming the aforementioned
notion, implied rates on the short sterling contracts remains at 4.47
percent.

Beige Book Disappointment
In light of housing starts continuing to rise in favor of dollar
bullishness, the overall beige book assessment by the Federal Reserve
suggested that the recent momentum may in fact be waning in the
world's largest economy. The report suggested gradual dips in
housing valuations in major metro areas of Boston and New York in
addition to sliding consumer confidence and retail activity.
Nonetheless, prices still rose on the evaluation as energy prices
dissipate throughout the economy. Ultimately, this looks to contribute
to further speculation of rising interest rates. However, with
subsequent data, it may spark some concerns over the justification of
such central bank policy.

Technically Speaking
Running on this morning's momentum, and a textbook double bottom, the
current rise looks to be slightly overextended as we hover the 1.7650
level. As a result, the most probable scenario looks to involve a
retracement to the 23.6 percent fib where previous consolidation
occurred. And penetration would see a definitive 1.7574 test.

GBPJPY

Fundamental Anticipation
With no economic data, aside from the Bank of England minutes, traders
are anticipating tomorrow's retail sales data for further suggestions
of potential near term rate hikes. Expected to rise 0.3 percent, an
upside surprise may further the notion even as the committee loses a
steadfast hawk, deputy governor Sir Andrew Large. At this point, policy
makers may be wanting the test the resiliency of the consumer on a hope
that even in a rate hike scenario, the market will ultimately adjust.
However, the concern still looms that further hikes will bolster price
increases even more.

Economic Growth Potential
Recent data has been confirming earlier notions of a complete
turnaround in the world's second largest economy as compared to last
year's results. Potentially furthering the current optimism looks to
be the upcoming Tertiary Index report for tomorrow. A reflection of the
services sector spending, higher readings would suggest that the sector
is back and revved up going into the end of the year. However, any
further downside surprises, such as the one seen in the previous period,
may lend to further strength for Yen bears.

Carry Trade Push
With a more stabilized interest rate for the U.K. region, traders
continued to bid the pound sterling higher. With the zero rate policy
currently maintained in the world's second largest economy, positions
subject to the carry trade strategy are now reaping 450 basis points in
light of rising fundamental factors in the Japanese economy.

Technically Speaking
Much like the cable major, the GBPJPY cross looks to be consolidating
at the top of the bull wave of the previous three sessions. A potential
retracement, confirmation comes from the Stochastic oscillator
displaying a death cross. However, a peak below the reference would be
needed for a definitive test of the 202.75 level.

GBPCHF

Further Carry Trade Potential
Much like the GBPJPY cross, traders bid the GBPCHF cross higher as a
carry trade opportunity exists with a 0.75-1 percent range on the Swiss
interest rate. Still reaping over 300 basis points, traders look to be
potentially adding on an optimistic consensus of tomorrow's retail
sales report. With no economic data to sway Swiss traders further
bidding for the sterling looks imminent as we enter the Asian session.

Technically Speaking
Although relatively choppy, the GBPCHF cross looks to be establishing
an upside channel. As a result, in connection with underlying major
activity the recent bull wave looks ripe for a retracement as it tests
the upper boundary. As a result, the first downside test looks to
reside at the 23.6 percent fib at 2.2766 with a penetration leading to a
definitive test of the 2.2703 figure support. Confirming any downside
direction is the Stochastic oscillator offering potential death cross
formation. However, without a definitive formation in addition to a dip
below the reference level, short sellers maybe reluctant at this point.

By DailyFX