GBP "upside momentum is building" - or is it declining? Mixed forecasts for the pound sterling on Friday

There are no major data points on offer for the British Pound Sterling (Currency:GBP) on Friday. Instead broader market themes including US Dollar strength will be important. In addition technical forecasts and positioning will be of interest to currency traders today; this will form the crux of our British Pound coverage today.

The Latest Wholesale Sterling Rates:

• The Pound to US Dollar exchange rate is 0.37 pct higher at 1.5863.
• The Pound to Euro exchange rate is 0.44 pct higher at 1.1937.
• The Pound to Australian Dollar exchange rate is 0.6 pct higher at 1.7152.
• The Pound to New Zealand Dollar exchange rate is 0.19 pct higher at 1.95578.

Please be aware that the above quotes are wholesale; 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, thus delivering more currency. Please find out more here.

15:47: Sterling relevant data points next week

09:30 on Tuesday the 17th: Core Consumer Price Index (YoY) (Aug). Forecasted at 2.1%.

Consumer Price Index (YoY) (Jul). Forecasted at 2.7%.

At 09:30 on Wednesday the 18th of September the Bank of England MPC Minutes for September are released. Watch for any divisions in voting patters as well as any overly dovish commentary. This would be GBP-negative.

Thursday the 19th of September we get retail sales at 09:30. Retail Sales ex-Fuel (YoY) (Aug) are forecasted to have increased by 3.4%.

14:50: Fresh boost for UK economy as small business confidence rises

We have a small, albeit still positive, piece of economic news this Friday afternoon.

Small business confidence has reached an all-time high according to the Federation of Small Businesses (FSB) latest Small Business Index published today.

The confidence Index rose to +33.5 in the third quarter of 2013 beating the previous high of 18 recorded in the first quarter of 2010 and is double the 15.9 score from the second quarter of 2013. The data shows three successive quarters of growth in 2013.

Encouragingly, confidence has improved for firms across most sectors and most UK regions. And, as a result of this improved confidence the investment in people and businesses needed to boost the economy is beginning to feed through.

14:41: Austerity, what austerity?

Will the recovery help close the budget deficit? We can only hope so as the UK's fiscal position remains dire. As Ross Walker at RBS points out:

"The latest public finances data are published and are expected to show – once adjustments are made to account for the numerous transfers and favourable accounting conventions – that the deficit remains stubbornly in line with year-earlier levels.

"The process of UK fiscal consolidation has broadly stalled, with the UK running almost the largest deficit in the developed world. Fiscal austerity seems to exist mainly in the minds of politicians."

14:17: Euro defying gravity at current levels

Shaun Osborne at TD Securities warns that the headline Euro Dollar pairing is overvalued. Be sure, if this rate takes a tumble so will EUR/GBP.

"Osborne says: "Our simple regression model of spreads/spot suggests that, on current spread form, EUR/USD should be trading below 1.30.   Spot seems to be defying gravity at current levels.    

"We think that the spot market will eventually catch up with spreads—rather than spreads reverting higher, in line with current spot levels.  The Fed may introduce a taper-lite and enhanced forward guidance which may dampen short-term yields somewhat but the ECB retains a dovish bias also policy makers remain very cautious about the outlook.  We favour EUR/USD shorts."

11:28: More gains ahead for GBP/AUD

Sean Lee at FXWW is favouring gains for the British Pound against the Aus Dollar, he says:

"After yesterday’s events I am now in the sell-AUD-rally camp, but primarily on the crosses as I’m still not a big fan of the USD especially pre-FOMC. Sell AUD/JPY near 93.00 or buy GBP/AUD near 1.6950."

For our morning report on the Australian currency please see here.

09:50: Euro / Pound exchange rate at risk of sharp recovery

Nerves on the EUR/GBP rate for the GBP bulls. Gareth Berry at UBS:

"Having tested the strong support at 0.8397, the immediate risk appears for a short-term recovery to unwind the sharp sell-off. Resistance is at 0.8486. Support is at 0.8383 ahead of 0.8285."

09:28: No focus on exchange rates by Treasury Select Committee / MPC

An interesting point forwarded by Camilla Sutton at Scotiabank pertinent to yesterday's appearance by Bank of England Governor Carney and other officials before the Treasury Select Committee:

"Once again there was almost no targeted focus on exchange rates, highlighting that from Governor Carney’s perspective the foundations of a healthy economy are not based in a weakening of the exchange rate."

09:15: Sell GBP into rallies

In marked contrast to Sutton's comments below, we hear from the technical forecasters at UniCredit Bank who are opposed to GBP gains:

"BoE governor Mark Carney reiterated that the bank’s first move in its exit strategy will be rate hikes before asset sales. Still, cable is showing a limited upside momentum much above 1.58 and thus selling it into rally continues to be favored, as well as buying EUR-GBP on dips below 0.84."

09:00: Short-term momentum behind the British Pound Sterling is building

Camilla Sutton at Scotiabank:

"Studies are generating buy signals and upside momentum is building. For short‐term traders, we favour being long GBP against EUR & USD."