The unemployment rate in the UK for the Dec 2013-February 2014 months was 6.9%, down from the 7.2% for the previous 3 months. This beat economists’ forecasts which was around 7.2% according to forexfactory.com. The 6.9% jobless rate is the lowest in exactly 5 years, since 6.7% was reported in April of 2009 for the Dec. 2008-Jan. 2009 period. The positive surprise for the UK economy sent the GBP soaring, though it was already pivoting towards a bullish continuation in the GBP/USD and GBP/JPY pairs…

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The key event risk for GBP today was the annual CPI for March, which came in at 1.6% as expected, slightly lower than the 1.7% in February. This is the lowest reading in more than 4 years as you can see from the chart below. The BoE is projected to increase its benchmark interest rate in 2015. However, lingering deflationary risk can delay this projection, which would be a GBP-negative factor. Even with this GBP-negative prospect, cable was able to find support after an initial negative reaction to the data…

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Last week, GBP/USD slid from the March high of 1.6683. The bearish run has brought the pair down to 61.8% retracement of a previous rally from 1.6454 to 1.6683. From the 1H chart, the GBP/USD does not look very bullish as price is trading under the 200, 100 and 50 simple moving averages. However, if the market can hold above this 61.8% retracement level where it did show some brief support, then the bullish case will look stronger…

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GBP/USD made a sharp rebound last week, off the 1.6460 area and is starting this week around 1.6650. The rally also came off a rising channel support, which suggests the bullish outlook remains intact. The orientation of the 200-100-50 simple moving averages reflect a bullish market as well. The daily stochastic is in a bullish cycle, and has yet to reach 80 – it is not overbought in the daily chart. Purely from a technical perspective, cable looks poised to test the 2014-high near 1.6820…

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As you can see the Bank of England has been having a hard time trying to keep inflation close to the 2% target. There has been upside inflation since the end of 2009, but is now manageable again. Motor fuel prices was a main contributor to February’s dip in inflation. The below-2% reading gives the BoE more breathing space in keeping its pace of Quantitative Easing and maintaining the benchmark interest rate at 0.5%…

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