GBP Rally Comes to a Sudden Halt as Profit Takers Press the Sell Button: Pound Sterling Live on Friday 23rd

British Pound Sterling (Currency:GBP) faces its only real test of the day at 09:30 when we get a slew of data releases, the big one to watch is the revision to Q2 GDP. Technically speaking, the outlook remains positive for GBP, but the UK currency must end Friday's trading session in a strong position to carry positive momentum into month end.

Highlights:
@ 09:32: GDP for Q2 upgraded, Sterling rallies
@ 12:53: Sterling sees renewed bout of selling. Why?
@ 15:55: Carney to speak - beware

15:55: Beware GBP downside next week as Carney speaks

Mark Carney is due to give his first public speech as governor on Wednesday, August 28.

Barclays have stuck their neck out and said it will be a negative for the British Pound,

Chris Walker at Barclays says:

"The MPC will likely be disappointed by the market response to its forward guidance framework. If the forward guidance framework was “working”, the correlation between rates and FX should be low because improvements in cyclical data, as have happened in recent weeks, should be reflected in a higher currency rather than in rates

"We believe that the BoE will need to remind the market that it is focused on the unemployment rate, and unless the rate starts to decline, improvements in other cyclical data should not be reflected in steeper rates.

"We would hedge for the risk that he uses the occasion to talk down rates more aggressively (hinting at further policy action) by buying short-dated GBP/USD downside.

"Short GBP positioning is significantly cleaner in recent weeks, while a structural short base remains; there has been steady buying of pounds ever since the QIR was released.

"Front-end GBPUSD vols have also sold-off accordingly. We argued that EURGBP is likely to drift lower given the stage of the respective recoveries, so the USD remains our favourite vehicle to express this view, in line with our forecasts."

15:07: British Pound Weakness = Profit Taking

Commonwealth Foreign Exchange tell clients:

"The British pound was slightly lower against the dollar overnight as investors continued to book profits on the pound’s impressive rally over recent weeks."

12:53: Sterling in a slip up

The British Pound has taken a bit of a dive over the past hour. No explanations given yet. We will keep our eyes open as to explanation.

12:35: How will the Bank of England react to the recent good data?

Currency markets are factoring in the Bank of England may have to bring forward interest rate hikes on the back of the recent strong data run.

Ishaq Siddiqi at ETX Capital says:

"Sharp focus will be on the BOE – although the MPC are likely to welcome this upward revision to growth, the board may have to backtrack a little on the thresholds given via the forward guidance policy.

"The MPC do not expect to tighten monetary policy until late 2016 when inflation hits the 2% target and unemployment rate drops below 7%, but if we continue to see rapid acceleration of growth in the UK, the BOE will have little choice but to tweak policies by hiking rates."

12:04: Does a weak Sterling impact the UK's ability to trade?

Will a weaker Sterling really boost UK exports?

The ONS has released a research paper entitled "Explanation Beyond Exchange Rates: Trends In UK Trade Since 2007" which has some interesting highlights for British Pound Sterling watchers.

Some snippets:  

"While the sterling effective exchange rate declined by more than 25% between Q3 2007 and Q1 2009, the balance of trade in goods and services remained broadly unchanged both during and following the depreciation."

"The findings of this article suggest that while the depreciation appears to have had little impact on the overall balance of trade, there is evidence of an increase in the balance of trade in goods during 2009. By contrast, exports of services show little evidence of the depreciation of sterling."

10:52: Great levels for GBP against AUD and NZD

The British Pound has achieved an inter-month high against the New Zealand and remains at multi-year highs against the Australian Dollar.
Read our latest report on GBP/AUD and GBP/NZD here.

09:49: Mortgage data was a miss

Sterling has ignored news that UK BBA Mortgages missed expectations coming in at 37.2k and not the forecasted 39.2k.

09:46: Is an increase in government spending a sign of economic rebalancing?

Forex.com: "Two things boosted growth in Q2: a large increase in government spending and fixed capital investment."

WorldFirst: "Whisper it but that does look like a bit of rebalancing for the Uk economy."

To be fair, it would seem the latter quote is in reference to the revision higher of the manufacturing component in GDP from 0.4 pct to 0.7 pct.

Also: Imports increase 2.5 pct while exports grew 3.6 pct.

09:32: British Pound rallies as Q2 GDP is revised higher

For those that need further confirmation that the UK economy is recovering we have this:

Q2 GDP has been revised up to +0.7 pct. Initial estimates were for an unchanged reading at +0.6 pct.

GBP higher:

Up 0.2 pct versus US dollar, 0.3 pct versus Euro, 0.43 pct versus AUD.

08:42: Sterling must not lose this foothold

Emmanuel Ng on the near-term direction of the Pound / Dollar exchange rate:

"GBP-USD eased below 1.5600 on Thursday on background USD resilience and stayed submerged into late NY. Today, UK 2Q GDP
numbers are on tap today and if the pair loses its foothold at 1.5600 on a sustained basis, the 200-day MA (1.5518) may present an interim floor."

08:30: GBP firm in the approach to the GDP numbers

The Pound Sterling is steady on Friday morning, remember this time yesterday whent he board was all red.

• The British Pound to Euro exchange rate is 0.18 pct up at 1.1693.
• The British Pound to US Dollar exchange rate is 0.06 pct higher at 1.5598.
• The British Pound to Australian Dollar exchange rate is 0.14 pct higher at 1.7332.
• The British Pound to New Zealand Dollar exchange rate is 0.32 pct higher at 1.9973.
• The Pound to South African Rand rate is 0.23 pct lower at 16.0232.

Please be aware that the above are wholesale market quotes to which your bank will affix a discretionary spread. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering more currency. Please learn more here.

08:20: Ahead we have the second estimate of Q2 GDP for the UK

The big data point of the day for the British Pound Sterling is the second estimate for Q2 GDP - will the initially reported +0.6 pct be confirmed?

Lloyds Bank Research tell us of their expectations:

"Typically, preliminary estimates are based on around 40% of information, leaving open the possibility of a revision. Having said that, despite an upward revision of Q2 construction output (6.3% of the economy), we do not expect any amendments to GDP."

Also at 09:30 look for Total Business Investment released by the National Statistics and BBA Mortgage Approvals.