GBP Boosted as ICAEW Forecast Better Growth; GBP/USD Faces Barrier at 1.6
The British Pound Sterling (Currency:GBP) is mixed on Monday morning. With a lack of mainstream UK data on hand Sterling will be dictated to by moves in the US Dollar and technical positioning by traders. We bring the latest shot-term and longer-term forecasts as well as views ahead of this week's important FOMC Meeting.
The Latest Wholesale Sterling Rates:
- The Pound to US Dollar exchange rate is 0.32 pct higher at 1.5927.
- The Pound to Euro exchange rate is 0.09 pct lower at 1.1933.
- The Pound to Australian Dollar exchange rate is 0.65 pct lower at 1.7063.
- The Pound to New Zealand Dollar exchange rate is 0.35 pct lower at 1.9466.
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.
16:42: Bears will be keen to sell Sterling at these levels
Matt Weller at GFT:
"Like its mainland cousin, the GBP/USD also gapped higher to start this week. Rates have generally stalled out since then, but as with the EUR/USD, bears are chomping at the bit to push the unit back down to fill its weekend gap.
"More aggressive traders may want to consider sell trades on the GBP/USD, targeting Friday’s close around 1.5875."
16:40: The week kicks off at 09:30 tomorrow
The first of this week's tests for Sterling comes at 09:30 tomorrow morning.
Consumer Price Index (YoY) (Jul) is forecast to come in at 2.7%.
Core Consumer Price Index (YoY) (Aug) is expected to read at 2.1%.
Any strong beats will surely propel the UK currency to new monthly highs.
A big miss and expect some selling.
16:20: Sterling rally courtesy of a summer boomlet
Paul Robson casts doubt on the longevity of the Sterling's recent rally:
"For now, we continue to believe that the recovery is just a Summer boomlet, more barbecues than widgets, and this leaves us expecting GBP's rally to soon exhaust."
15:46: Pound's rally against the US Dollar is overdone… or is it?
Stephen Gallo at BMO Capital Markets gives his view of the speculative positioning on the British Pound:
"A simple glance at the recent move higher in GBP/USD, taken alongside the change in net speculative positioning, would appear to suggest that the rally in the pair is overdone.
"However, the anecdotal evidence suggests that real official money participants have probably been a very important force on the bid side of late, whilst systematic funds are still largely quite short of the GBP.
"Moreover, what the IMM data tell us is that long positioning in the GBP has not increased in a major way yet, suggesting that a large chunk of the move higher in GBP/USD has been a result of some segments of the leveraged money community cutting shorts, but not necessarily opening new longs to the same degree.
"Capitulation on the systematic side of the speculative community alongside additional positive UK macro economic data could in fact mean further upside in GBP/USD is likely before the cycle turns."
15:02: UBS bullish on Sterling
The latest short-term forecasts from Gareth Berry at UBS favour further gains for Sterling:
"With the trending and momentum indicators pointing higher, potential is for more upside. Resistance is at 1.6027 ahead of 1.6179. Support is at 1.5777.
"Further selling pressure suggests more downside in the near-term. Support is at 0.8285 ahead of 0.8165. Resistance is at 0.8454."
14:39: Euro dips on Draghi comments, Dollar weakness widespread
Lee Mumford at Spreadex:
"Global markets continue to trade in positive territory heading into the afternoon as investors welcome the withdrawal of Larry Summers from the Federal Reserve and an agreement between the US and Russia for destroying Syria’s chemical weapons.
"The dollar weakened against the majority of major peers after Lawrence Summers withdrew his bid to become Federal Reserve chairman who is believed to favour scaling back QE. A separate survey of economists showed that the Fed is likely to taper its monthly bond-buying program by $10 billion to $75 billion this week.
"Comments from European Central Bank chairman Mario Draghi today stated that the Eurozone economic recovery 'is only in its infancy' and that governments must take steps to improve growth. The Euro took to the downside before recovering later this afternoon as Draghi stated the economy remains fragile and unemployment is still far too high."
11:45: The grind higher continues for GBP/USD
Mazen Salhab at Swissquote Research gives his views on the GBP vs USD:
"The pair remains comfortably in the uptrend channel trend momentum indicators are flattening in bullish territory. We would buy on dips with our near term target at 1.5883 then 1.6000.
For the latest short term forecasts on GBP-USD please see our recently published piece on the matter.
10:22: GBP/EUR back above 1.2?
We have just taken a look at the prospects for the Pound Euro exchange rate. Good news for the Sterling bulls, read on.
09:35: GBP/USD "waypoint expected only at 1.6000"
Emmanuel Ng at OCBC Bank gives his view on the GBP/USD pairing on Monday morning:
"Construction numbers also lent a hand to the GBP on Friday with the GBP-USD managing to lift above 1.5800 convincingly while the EUR-GBP finally sank below 0.8400.
"Going ahead, note that GBP-USD has broken above its recent monthly range on the back of supportive UK economic news flow with the next expected waypoint only at 1.6000 while some consolidation can be expected around the 1.5885 region.
"On the CFTC front, note that net speculative GBP shorts were also pared in the latest week."
08:45: Major currency outlook
Sean Lee at FXWW furnishes us with today's outlook for the major currency pairs:
"GBP/USD has support at 1.5930 and 1.5880 with stops building beneath the latter level. Topside, resistance ahead of the 1.60 barrier option and then 1.6050.
"EUR/USD has major resistance at 1.3400 - 20 and then 1.3450. Minor support lies now at 1.3320, better at 1.3280 and 1.3420, with the latter level now pivotal for bulls.
"USD/JPY has minor support at 98.50, better demand seen at 98.20 and 98.00. Resistance at 99.20, 99.50 and heavy at 99.80.
"AUD/USD has support at 0.9220 and 0.9150, while resistance lined up at 0.94.
"NZD/USD support at 0.8130 and better at 0.8080. Stops beneath the big figure. Topside, resistance at 0.8220."
08:20: The UK agenda
UK releases include inflation tomorrow (see expectations @15:47 here), MPC minutes on Wednesday, with retail sales and public finances on Thursday and Friday respectively.
European volatility will come from tomorrow’s German ZEW announcement in the lead-up to this weekend’s German election.
08:17: Accounting for growth
The Institute of Chartered Accountants in England and Wales (ICAEW) announced today that it expects 2.3 per cent growth next year, after 1.5 per cent growth this year, in line with the predictions of the Organisation for Economic Co-operation and Development (OECD). As recently as June, the group only predicted a one per cent expansion.
08:00: This week's agenda dominated by US Dollar and US FOMC meeting
Lloyds Bank Research tell us that the key event for financial markets, and the US Dollar in particular, lies in the US:
"The economic calendar this week is dominated by the US FOMC meeting on Wednesday. The Fed is widely expected to announce the start of a steady scaling back of its policy stimulus.
"While there remains significant uncertainty over the size of the tapering, from a market’s perspective, attention is likely to focus on any clues the Fed gives over its longer-term strategy for liquidity withdrawal."