GBP in Renewed Slump vs Euro and US Dollar, Outlook to be Technically Driven Ahead of Carney Speech: Pound Live on Tuesday the 27th

Modified: Wednesday, 28 August 2013 09:05 BST
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The British Pound Sterling (Currency:GBP) has staged a significant retreat against the Euro and US Dollar on Tuesday, however there are some decent gains to be had against emerging market and commodity currencies. The outlook will be technically driven ahead of Mark Carney's first major speech at the UK Parliament at 12:45 tomorrow.

14:52: Sterling downside well protected versus Euro

"After the August repositioning, EUR/GBP has incorporated the recent improvement in the UK eco data. Even so, we think that the downside in sterling has become well-protected." Read more in our latest Euro Pound report.

13:16: Sterling looking heavy in early afternoon

Further pressure for the British Pound ahead of tomorrow's Carney speech:

1 GBP converts to EUR 1.1618. (0.3 pct lower on a daily basis).
1 GBP converts to USD 1.5492. (0.54 pct lower).
1 GBP converts to AUD 1.7284. (0.2 pct higher).
1 GBP converts to NZD 1.9902. (0.3 pct higher).
1 GBP converts to CAD 1.6316. (0.28 pct lower).
1 GBP converts to 102 INR. (2 pct higher).

NB: The above are wholesale inter-bank quotes. Your bank will charge a discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering more currency. Please learn more here.

12:31: RBS upgrade UK GDP, See BoE rate hike in 2015

rbs interest rate hike Why is the British Pound in a better position than seen two months ago? It is largely because currency markets can now see when an interest rate hike is likely. [This topic plays into the apprehension being seen ahead of Carney's speech in Nottingham tomorrow, please read below].

Ross Walker at RBS tells us they see the UK economy growing at a faster rate than previously estimated, this has allowed them to forecasting an interest rate hike at the BoE:

"We have revised up our UK GDP forecasts for 2013 (1.3% from 1.1%) and 2014 (2.0% from 1.5%) as the pace of expansion in H1 looks increasingly likely to be sustained in the remainder of the year.

"Although the BoE's forward guidance has had a less dovish impact than expected, the need for greater 'monetary activism' feels as if it is being overtaken by events – we expect the 7% unemployment threshold to be reached a year earlier than on the MPC's central projection.

"Our economic and labour market outlook suggests the BoE's forward guidance will be 'knocked-out' in early 2015.

"That would be consistent with Bank Rate and the QE asset purchase target being left on hold throughout our formal forecast period (to end-2014), suggesting the first hike around mid-2015."

10:36: GBP being left behind by the EUR

FX Market Alerts tell us:

"GBP is being left behind as the sell recommendations start to increase ahead of BoE Governor Carney's speech tomorrow. .8622 is the next resistance level for EUR/GBP, while it's not so long ago that .8630 was an almost irresistible pivot point."

10:17: This week's big event for the British pound

carney Jeremy Cook at WorldFirst tells us why Wednesday will see heightened volatility in GBP:

"The main event for the pound this week will be a speech by Dr Carney at Nottingham University during which he is likely to further chastise the market about his ability to keep interest rates low until 2016.

"The market is currently looking for a rate rise in September 2014 and it’s this disconnect that’s keeping the pound artificially high at the moment.

"I believe that despite the 0.7% increase in GDP in Q2, the Governor will dictate that this does not constitute ‘escape velocity’ and that BOE monetary policy will remain a mix of ultra-low rates and additional QE. Carney speaks tomorrow at 13.45 BST."

10:06: GBP/EUR sees the bears start to take over

The technical picture facing GBP/EUR has turned a sight cloudier.

On the short-term charts (2 to 6 weeks) we see 3 bullish events outweighing 2 bearish events. However, momentum has switched with the 2 bearish events being formed in succession: A negative commodity channel index alert formed at 1.1676 on the 20th of August, this was followed by a Fast Stochastic at 1.1633.

08:30: Sterling sees losses versus USD and EUR

The Pound to Euro exchange rate is 0.3 pct down on a day-to-day basis 1.1614.
The Pound to US Dollar exchange rate is 0.33 pct lower at 1.5526.
The Pound to Australian Dollar rate is 0.45 pct higher at 1.7330.
The Pound to New Zealand Dollar exchange rate is 0.3 pct higher at 1.9899.
The Pound to South African Rand is 0.25 pct higher at 16.1615.

08:28: Currencies markets today; German IfO, US Consumer Confidence, Case Shiller

Lloyds Bank Research tell us what to look out for from the currency markets on Tuesday:

"UK markets reopen to much the same themes as last week: namely, prospects for Fed tapering, emerging market volatility, and ongoing signs of domestic and global economic recovery.

"With no fresh domestic data releases, the economic focus today will be on the German IfO, US consumer confidence, Richmond Fed manufacturing index and Case Shiller house price surveys. There is also a US 2-yr note auction scheduled."

08:15: CBI point to recovering Services sector

Overnight we had some second-string domestic data. While positive, it has largely been ignored by currency markets. The data did however have a couple of sour notes for hotelliers and pubs.

According to the CBI, services firms have enjoyed the fastest rise in business volumes since the boom days of 2007 in the past three months and expect further growth later this year, a survey showed on Tuesday.

"We've seen a further build-up of momentum in the service sector this quarter, with business and professional services firms in particular seeing a turnaround in their fortunes," said Stephen Gifford, CBI director of economics.