British Pound (GBP) LIVE: Sterling Surges as Carney Speaks + Unemployment Rate Falls to 7.6%
The British pound sterling (GBP) is tipped to come under further pressure through the course of Wednesday in a continuation of this week's theme that has placed the UK currency near the bottom of the pile in FX land.
Today we have some important events to look forward to - first up is employment data at 09:30 and then at 10:30 we will be covering the highlight of the day which comes in the form of the Bank of England Quarterly Inflation Report and Press Conference.
Rates as of last update
- The pound to euro exchange rate is 0.6 pct higher on a day-to-day basis at 1.1912.
- The pound to US dollar is 0.5 pct higher at 1.5984.
- The pound Australian dollar exchange rate is 0.6 pct higher at 1.7200.
- The pound New Zealand dollar is 0.5 pct higher at 1.9450.
NB: All quotes here are taken from the wholesale spot markets; your bank will subtract a spread at their discretion when delivering a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering up to 5% more currency. Please learn more here.
16:50: Retail Sales dominate Thursday's agenda
We should see things begin to calm down somewhat for the GBP now that the employment data and Quarterly Inflation Report are behind us.
Tomorrow's Retail Sales data from the ONS will however attract some attention early on.
Retail Sales (YoY) (Oct): Expected +3.1%, last month +2.2%
Retail Sales (MoM) (Oct): Expected 0%, last month +0.6%
Retail Sales ex-Fuel (MoM) (Oct): Expected -0.2%, last month +0.7%
Retail Sales ex-Fuel (YoY) (Oct): Expected +3.1%, last month +2.8%
The real agenda for tomorrow here on British Pound Sterling Live will however be whether we have seen a positive turn in momentum for the UK currency. We will be on the lookout for all the latest forecasts and predictions and will observe the key technical levels.
15:36: GBP on a tear higher
With the opening of US markets we have seen interest in sterling increase such that the GBP/EUR rate is now 0.8 pct up on a day-to-day basis at 1.933.
14:23: Rate hike? It's complicated
Stephen Gallo at BMO Capital Markets muddies the water a bit when he says using the unemployment rate as a touchstone for second-guessing the Bank of England's intentions will be superseded by nominal wage growth rates:
"At the time of the August Inflation Report, spot GBP/USD rallied about 1.3% on the day and an additional 2.5% or so over the course of the subsequent 4-6 weeks, prior to the Fed’s ‘no taper’.
"Even if the unemployment rate falls further at a rather quick pace, our view is that the GBP leg of any GBPUSD strength will experience diminishing marginal returns from here, relative to the aforementioned pace of GBP strength during Q3.
"All things being equal, as long as nominal wage growth remains very subdued, as it has done, continued downplaying of the fall in unemployment by the BoE will eventually for FX become an implicit pushing back of the first rate hike. Seeing is believing."
13:42: Bears showed their weakness @ 1.59 yesterday
Sean Lee at FXWW is a buyer of GBP/USD on any sign of a dip:
"The bears showed their weakness yesterday, unable to hold below 1.5900 after an important technical break and this pair is headed much higher in the medium term. The market remains moderately bullish USD in the short-term so we still may see one exhaustive sell off towards my ideal entry level near 1.5775 but all dips are buying opportunities in my very biased view.
"I’m small long of cable, looking to add on dips, and I’m still running a core short in EUR/GBP. I cut my AUD/CHF for a small loss as it was proving a distraction from the main event."
13:17: Beware the GBP/USD
The UK currency is the outperformed on global FX markets today; Greg Moore at TD Securities predicts the outlook will favour the GBP going forward.
But, the GBP/USD could be the exception:
"The solid UK data trend should continue to see the GBP outperform most of the crosses, but against the USD the trend is not quite as clear.
"From here, like with the rest of the FX space against the USD, the focus is on the Fed, so tonight’s comments from Bernanke and tomorrow’s comments from Yellen should set the tone in the coming sessions, and perhaps even for the next week or two. Ahead of Bernanke’s appearance tonight, there’s not much else to highlight on the calendar, which means we are probably in for another quiet day. Overall though we still prefer being long the USD as the market continues to price in the prospects of a sooner start to tapering."
12:22: Deutsche Bank yet to be convinced on EUR/GBP appreciation
According to George Saravelos at Deutsche Bank it is hard to build a more positive view on the pound sterling to euro exchange rate owing to the headwinds of negative flows data:
"Developments have been very negative on the flow side. The last few trade numbers have been disappointing, with the Q2 current account deficit at more than 4% GDP, and the September trade numbers posting a record annualized deficit with the EU of more than 70bn EUR.
"This deterioration will not bring the end of the world, but it is tough to build a fundamentally bullish case for sterling under such negative flow dynamics - the more the domestic demand-led recovery continues, the greater the deterioration in the trade accounts as British consumers import more."
11:53: GBP will be hard to contain
More from Schlossberg, this time on the outlook for GBP:
"Yet if UK economic data continues to surprise to the upside the upward pressure on sterling is likely to continue and the pair may make another run at the 1.6000 level especially if tomorrow's UK Retail Sales prove especially strong."
11:51: Sterling repulsed by 1.6 once again
Boris Schlossberg at BK Asset Management on why today's GBP recovery has subsided:
"Cable soared but then backed off the highs in the aftermath of the Bank of England Inflation report which suggested that the UK economy may reach the bank's 7% threshold unemployment much sooner than originally forecast.
"Cable jumped to a high of 1.6000 in reaction to the revised projections from the BoE, but then trailed off towards the 1.5950 level as MPC officials continued to dampen any expectations of policy tightening."
11:25: Job creation spreading to more regions - CBI
Neil Carberry, CBI Director of Employment and Skills, on today's improved job numbers:
"Further signs of recovery can clearly be seen in these jobs figures. Unemployment is falling faster and businesses have taken on 124,000 more employees in full-time work.
"It is really pleasing to see more regions benefiting from job creation.
"It's clear that pay restraint is continuing to underpin employment growth. We expect wages to pick up next year, but sustained growth must come first to protect jobs.”
11:17: FX markets dominated by GBP strength
We are at the tail-end of the Quarterly Inflation Report press conference, back to what the commentators we follow have to say about all this. First up, Ipek Ozkardeskaya at Swissquote Bank:
"The FX markets are dominated by GBP strength. UK’s three-month jobless rate retreated from 7.7% to 7.6% in September, while BoE released the quarterly inflation report. In his press conference, the BoE Governor Carney revised the growth forecasts upwards and stated that the unemployment falls faster than expected.
"Moving forward, the market focus should shift back to ECB and Fed officials’ comments on policy outlooks. Yesterday, Fed Lockhart’s hawkish comments sent AUDUSD to two-month lows, while JPY failed to jump over the 100-wall against USD."
10:30: Coverage of Inflation Report - Unemployment will fall to 7% at last quarter of 2014.
10:31: Carney doing his set piece. "Recovery truly taking hold"
10:33: Strong sterling = "siginficantly lower" inflation. Inflation expectations remain well anchored.
10:34: Sterling loving this!
10:34: Employment falling quicker than expected.
10:38: Q&A's start.
10:40: The entire GBP complex is up. "We have one of the strongest recoveries in the advanced world" says Carney.
10:42: "GBPUSD - still hovering around 1.60 as the Inflation Report continues - 1.6015 - 50-day sma - key resistance" - Forex.com.
10:43: Recap: Unemployment will fall to 7% at last quarter of 2014 according to the Bank. This is a massive upgrade - the prior prediction was 2016!
10:59: "Short sterling bear steepening continuing. Dec 2015 contract pointing to rates at 1.5%" - WorldFirst.
11:01: "Move by GBP/USD on BoE news has completely erased yesterday's CPI-driven losses. But not much conviction past 1.6000. Far enough for now?" - David Jones at IG.
11:02: GBP calming down - slips below 1.19 against the euro once more.
11:08: On London housing bubble: "We don't make policy for within the Circle Line, we make policy for the United Kingdom."
10:11: Is this a buying opportunity for GBP against EUR?
Lloyds Bank Research reckons that the GBP will likely win out against the Euro, particularly with unemployment rate going down:
"Forward guidance means that the ILO unemployment rate is now the single most important UK number, and the market is expecting the September data to show a drop in the rate to 7.6%, edging closer to the 7% threshold. If the numbers are at or below market expectations, it should set a positive tone for GBP, while if the rate fails to drop recent GBP weakness can be expected to extend.
"In reality, it remains hard to justify EUR/GBP being at levels above those seen before the ECB rate cut, but the current market tone is seeing general weakness in the higher beta currencies, and as long as this is the case, it will be hard for GBP to rally. Even so, UK data remains objectively strong, and yesterday’s drop in inflation is of little real consequence for MPC policy, so the current dip in GBP should be seen as a medium term buying opportunity."
09:37: GBP heads higher
Look at the reaction in GBP/EUR to the employment data. The rally will be capped no doubt as the big event of the day still lies ahead.
09:34: GBP shoots higher on good employment data
We warned that today would see volatility for GBP - and so it has with some perky employment numbers.
Claimant Count Change (Sep): -41.7, expectations -35K, last month -44K.
ILO Unemployment Rate (3M) (Sep): 7.6%, expectations 7.7%.
Remember - the Bank of England will seriously consider an interest rate rise when the ILO rate hits 7%. This is an interesting fall in the rate - how will Carney react to this?
08:47: GBP-complex upside to be limited
Ipek Ozkardeskaya at Swissquote Bank is another commentator who believes GBP could struggle today:
"In his press conference, we expect Carney to maintain his dovish tone and to refrain anticipating a too-early tightening which may damage the economic recovery.
"While we expect the growth forecasts to be revised on the upside, the weakness in inflation figures (released yesterday: CPI y/y 2.2% vs. 2.5% exp. & 2.7% last) give support to Carney in following his forward guidance/inflation knock-out framework. And this should limit the upside in GBP-complex."
08:30: More predictions that today's BoE event will be GBP-negative
"In its Inflation Report, the BoE is likely to upgrade its GDP growth forecasts and lower the expected path for the jobless rate. The latter would probably cause disappointment in the market and is likely to hurt cable towards 1.58 and keep EUR-GBP above 0.84." - UniCredit Bank.
08:20: GBP could sell quickly if BoE revises down inflation forecasts
Beware, the GBP sell-off is not over, more from Lien:
"We believe investors were just itching for a reason to drive sterling lower. With the Bank of England set to release its updated CPI and GDP forecasts, the decline in price pressures could affect the central bank's tone on inflation. If their forecasts are revised down significantly, sterling could extend its losses quickly against the euro and U.S. dollar."
08:17: Markets looking for any excuse to sell the British Pound
The pound was put under the hammer yesterday when it was shown that UK inflation unexpectedly fell. Indeed the market reaction to the data caught some off-guard.
"We did not expect the CPI report to have such a dramatic impact on sterling because it is not expected to change the Bank of England's steady policy plans but apparently the currency pair was itching for a reason to fall." - Kathy Lien at BK Asset Management.