Pound Sterling in strong recovery following earlier retail sales disappointment - 14/11 Live Coverage
The British pound sterling (GBP) has enjoyed a roller-coaster of a week so far; the net sum for us is to ask what the near and longer-term now looks like. We deploy our sleuth-like skills to dig out the latest and most useful views on were the British currency is now headed.
Rates as of last update:
- The pound euro exchange rate is 0.41% higher at 1.1955.
- The pound dollar exchange rate is 0.1% higher at 1.6074.
- The pound New Zealand dollar rate is 0.6% higher at 1.9496.
- The pound Aus dollar exchange rate is 0.77% up at 1.7293.
Please keep in mind all quotations here are inter-bank spot rates. Your retail rate will be delivered with a spread being subtracted by your bank at their discretion. This is a competitive market though and the good news is that an independent FX provider will seek to beat your bank's rate, thus delivering up to 5% more FX. Please learn more here.
16:17: GBP looking strong against the Canadian dollar
If you are looking for a bullish setup look no further than the GBP/CAD.
Greg Moore at TD Securities says:
"GBP/CAD remains technically very well supported. The short-term trend lost a little momentum over the past week but we continue to highlight an unusually strong constellation of bullishly-aligned momentum signals from the longer-term studies that make for compelling evidence that the move up in the cross has further—perhaps a lot further—to run in the course of the next few months. Near-term, we are looking for a push to 1.70/1.72. New cycle highs would be supportive of more GBP/CAD strength."
16:02: GBP/USD pushes higher as USD strength falters
Some good gains being seen by the British pound against the US dollar.
Indeed, the US dollar basket has eased back as Janet Yellen conducts her interview before congress.
The US dollar index has given up some of its strength allowing the likes of AUD, NZD and ZAR to sneak back in. Thus, we are seeing GBP/AUD, GBP/NZD and GBP/ZAR ease back in sympathy.
15:03: EUR/GBP in trouble?
"EURGBP downside pressure builds both fundamentally & technically. EURGBP appears poised to move lower on both relative monetary policy and economic performance." - Camilla Sutton at Scotiabank.
14:23: GBP/USD neutrally aligned
Today's currency market action is being characterised by USD strength. However, GBP remains solid in testament to the favour the currency has been afforded over the past 24 hours.
The net result is a neutral view on GBP/USD. Matt Weller at GFT says:
"The GBP/USD rallied in yesterday’s North American session, but rates have since lost all momentum as the pair struggles to break above the central Monthly Pivot Point at 1.6052. As we go to press, the 1.6052 level is the most important level to watch for the day: a confirmed break above that barrier would open the door for a run to last week’s highs at 1.6100 next, but our bias in the pair is neutral as long as that level holds."
14:16: GBP powering ahead vs EUR, AUD, AUD, ZAR
The pound has added an extra 0.4% against the euro since last night's close. The earlier retail sales data has been completely forgotten.
The gains must however be taken within a wider context - the commodity currencies are suffering right across the board - this includes the AUD, NZD and ZAR. GBP has been more than obliging to take a deep dig into these currencies.
12:37: GBP/USD due to form a descending correction?
The latest forecasts from RoboForex make for an interesting consideration:
"The pound is still moving upwards; market formed continuation structure near 1.5975 and may reach local target at 1.6070. Later, in our opinion, price may form descending correction to return to 1.5975 to test it from above and then start the fifth wave to reach 1.6095. This structure is considered to be trend wave. After correction, pair is expected to continue moving upwards."
10:57: Keep an eye on wage growth, unemployment becoming less important for forward guidance?
A couple of commentators have, following yesterday's Bank of England Inflation Report, touched on the importance of wage growth.
First, see comment from Stephen Gallo at BMO Capital @14:23.
Today we hear from Nick Bate at Bank of America Merrill Lynch Global Research:
"We were struck by several references to real wages during the Q&A (for example, the Governor saying that while stronger consumption has thus far been supported by declining savings, "in order for that to be sustained there has to be a rise in real wages").
"While not a formal part of the guidance framework the market would be well advised to keep a close eye on them, as they could be a very important factor in influencing expectations when unemployment drops close to 7.0%, of whether or not the MPC may then be prepared to sanction and signal modest monetary tightening, or might consider lowering the threshold, prolonging guidance and keeping Bank Rate at its current level for longer."
10:31: Limited upside potential for GBP-USD in the longer term
Luc Luyet at MIG Bank gives his verdict on the outlook for the GBP/USD exchange rate:
"GBP/USD rose sharply yesterday, suggesting further moves within the horizontal range defined by the support at 1.5894/1.5855 and the resistance at 1.6260 (01/10/2013 high). An hourly resistance stands at 1.6118 (06/11/2013 high).
"In the longer term, given the deep overbought conditions, we continue to see a limited upside potential near the resistance at 1.6260 (01/10/2013 high). A decisive break of the support at 1.5894 is needed to deteriorate the long-term technical structure."
10:00: GBP recovery underway
The intial reaction to the retail sales numbers saw traders reaching for the sell button. In the subsequent half hour the GBP has recovered however, particularly against the Euro:
09:40: UK retail sales flop, British pound slumps
We warned that the UK currency would react badly to any negative surprises; and so it has!
Retail Sales (YoY) (Oct): +1.8% vs +3.1% expected.
Retail Sales (MoM) (Oct): -0.7% vs 0% expected.
Retail Sales ex-Fuel (MoM) (Oct): -0.6% vs -0.2% expected.
Retail Sales ex-Fuel (YoY) (Oct): +2.3% vs +3.1% expected.
The roller-coaster week continues.
08:58: GBP to struggle to hold 1.6
"Flat retail sales are probably enough to keep cable on a sluggish tone after it failed to hold gains above 1.60 yesterday on the back of the BoE Inflation Report. EUR-GBP is likely to further struggle above 0.84." - UniCredit Bank.
08:48: Schroders don't see interest rate rise until 2016
In addition to asking where GBP is going, we also ask where interest rates are going as they are so deeply connected.
Azad Zangana, European economist at Schroders, says an interest rate hike is unlikely until 2016:
"We have brought forward our forecast for the first interest rate rise from the end of 2016, to the start of 2016, but we are not confident enough in the sustainability of the recovery to forecast tightening monetary policy in 2015, especially due to the poor productivity growth seen.
"The UK’s recovery has considerable momentum going into 2014, but whether the debt fuelled housing recovery translates into anything more than a short-term rebound in demand is questionable, particularly in the absence of wage growth outpacing inflation."
08:20: GBP now more prone to negative data releases
Despite a continued strength of UK data releases the currency struggles to break into fresh new highs. According to Lloyds Bank Research the dangers are now to the bottom side:
"For today UK retail sales will be the focus. Our economists view risks are to the downside. Given recent market price action, we think GBP will likely be more vulnerable to a downside surprise than an upside. The 1.59 level will likely provide good support for GBP/USD, and the 1.6120 level looks to be decent resistance on the topside."
08:07: Reviewing the outlook for the British pound
The real agenda for today here on British Pound Sterling Live will 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.
08:00: Retail Sales dominate Thursday's agenda
We should see things begin to calm down on the data front for the British pound (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%
IN REVIEW: Wednesday saw the GBP surge on a solid employment data release.
While the consensus forecast was for a marginal decline in the unemployment rate to 7.6%, a few forecasters had expected no change.
Furthermore, the claimant count declined more than expected which supports a continued improvement in the labour market.
The Quarterly Inflation report also saw GBP boosted as the Bank brought forward its projection of when unemployment will reach the 7% threshold to Q3 2015 (previously Q2 2016).