British Pound Sterling on Tues 17th: Pound Euro Exchange Rate Awaits ZEW Survey + UK Inflation Data Presents GBP With Immediate Threat

The British Pound Sterling (Currency:GBP) had an unconvincing day on the global currency markets yesterday; today will provide traders with some tangible data with the inflation figures due at 09:30 being key to the near-term outlook.

Pound Sterling Exchange Rates as of last update:

• 1 GBP converts into 1.1902 EUR: the exchange rate is 0.18 pct lower on last night's close.
• 1 GBP converts into 1.5899 USD: 0.02 pct higher.
• 1 GBP converts into 1.7026 AUD: 0.22 lower.
• 1 GBP converts into 1.9396 NZD: 0.33 pct lower.

Please Note: These are spot market quotes; your bank will affix a discretionary spread when offering a rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.

16:32: Sterling's next hurdle

Sterling's next hurdle comes at 09:30 when the Bank of England MPC Minutes for the September meeting are released.

Importantly, we await to see the MPC's assessment of the recent run of good data and look for hints that action on interest rates may have to be bought forward.

This would be GBP positive.

16:17: Tomorrow's FOMC event will be USD positive say Barclays

Tomorrow's main financial market driver concerns the US Federal Reserve. How will it play for the US Dollar?

Aroop Chatterjee at Barclays believes it will be USD positive:

"The USD has weakened versus most currencies ahead of tomorrow’s FOMC meeting. Although the risk of a dovish surprise certainly exists, we disagree and see the news emerging from the FOMC as being more hawkish relative to market expectations/pricing.

"The chairman is likely to underline the conditional/state-dependent nature of forward guidance and indeed Fed forecasts. This may serve to dampen the market response in the short term; however, a strong underlying growth picture, improving labor market conditions and progress on inflation all mean that the medium-term appreciation trend in the USD is intact."

16:08: Where GBP currently stands

"The British pound was knocked from an eight-month peak against the greenback overnight after U.K. CPI came in cooler than expected. Britain’s consumer price index rose by 0.4%(m/m) in August, slightly cooler than the 0.5%(m/m) expected.

"Year-over-year, CPI fell to 2.7% from 2.8%. While not a major surprise, the data should give the Bank of England some breathing room to keep monetary policy unchanged for some time. Markets had begun to speculate that a recent string of upside surprises to U.K. data could force the BOE to lift rates sooner than previously expected."  

- Omer Esiner at Commonwealth Foreign Exchange.

15:45: All signals are in buy territory

Camilla Sutton at Scotiabank remains bullish on the GBP/USD:

"GBPUSD short‐term technicals: bullish—all studies are in buy territory, with few warning signals on the charts. The RSI at 74, leaves some upside room before reaching overbought levels."

14:50: GBP strength will return

Sterling is undergoing a bout of consolidation says Emmanuel Ng at OCBC Bank:

"The recent string of domestic data surprises have also provided a foundation for sterling resilience. In the near term, expect some consolidation around current levels pending further global cues with the pair seen in a 1.5800-1.6000 range."

14:30: Pound Sterling hit by profit taking

The team at FX Market Alerts have noted the Pound Sterling has come under attack from profit takers:

"Cable is edging lower in quiet trade, pulling back to 1.5880-85 levels in the last few minutes, as more players look to take profit ahead of the FOMC meeting tomorrow night.

"1.6000 has proved to be a stern obstacle over the last 24 hours, with exotic related sales accompanied by longer term selling interest also.

"This has moved EUR/GBP up through .8400 in the process, but .8410 is as far as we have gotten so far. Good size selling interest reported at .8420."

11:30: GBP under increasing pressure

Sterling is suffering following today's inflation data.

The Euro was meanwhile boosted by the ZEW Survey outcome.

ZEW Survey - Economic Sentiment (Sep) smashed expectations by coming in at 58.6. Forecasters had only expected 47.2.

09:50: Market focus already turning to tomorrow's main event

With inflation data behind us currency traders are already starting to consider tomorrow's GBP-relevant event.

Mazen Salhab at Swissquote says:

"UK CPI will be interesting but the key focus will be tomorrows MPC minute release. With no policy statement released at the meeting, we will finally get insight into the BoE view of the recent improvement in economic data.

"Carney reiterated that the BoE will keep policy loose, however, his verbal intervention incapability to diminish front-end rates increase on improving data continues to give strength to GBP."

09:37: Sterling turns weaker

Sterling has not benefited from today's on-consensus inflation data. An element of profit taking perhaps?

09:31: Inflation slows

Core Consumer Price Index (YoY) (Aug): 2.0% Actual, 2.1% Consensus, 2.0% previous.
Consumer Price Index (YoY) (Jul): 2.7% Actual, 2.7% Consensus, 2.8% previous.

08:50: Attractive levels to Sell GBP say UniCredit

Also forecasting a the GBP to fall is the team at UniCredit Bank:

"Steady or slightly lower UK CPI data this morning are unlikely to push cable to test 1.60. Consequently, we view current levels even more as quite attractive to return short. Likewise, the current EUR-GBP fall below 0.84 remains a buying opportunity."

08:31: US Dollar primed for a comeback?

We hear from Matt Weller at GFT who says there will be no short supply of those looking to sell the British Pound Sterling at current levels:

"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."

08:15: Pound to Euro exchange rate awaits ZEW Survey

One of the key drivers for GBP/EUR on Tuesday will be the ZEW Survey released at 10:00.

The Economic Sentiment published by the Zentrum für Europäische Wirtschaftsforschung measures the institutional investor sentiment, reflecting the difference between the share of investors that are optimistic and the share of analysts that are pessimistic.

Consensus estimates are for 47.2; up from last month's 44.

08:12: Inflation data provides near-term Sterling risk

The first of this week's tests for Sterling comes at 09:30 this 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.