British Pound on Monday 23rd Sept: GBP Outlook Remains Positive, Beware of a Correction on Overbought Conditions
The British Pound Sterling (Currency:GBP) is on a firm footing at the start of the final week of September. There are no economic events due from the UK today with the ability to shift the currency. Technical considerations and external drivers are thus of importance and will form the focus of today's live coverage.
Latest FX Rates from the Wholesale Markets (As of Last Post):
- The pound euro exchange rate is 0.39 pct up on Friday's closing level at 1.1880.
- The pound US dollar exchange rate is 0.28 pct higher at 1.6050.
- The pound Australian dollar exchange rate is 0.04 pct lower at 1.7034.
- The pound New Zealand dollar exchange rate is 0.07 pct higher at 1.9152.
Be aware that the above are spot market inter-bank currency rates. Your bank will charge a spread when transferring your money. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you up to 5% more currency. Please learn more here.
16:47: Beware! US dollar to strengthen 8-10%
Leander Dreyer at Jyske Bank has today recommended clients remain alert to the inevitable appreciation of the US Dollar.
Dreyer says:
"Despite a continued relaxed monetary policy from the Fed, we consider the recent USD-depreciation an attractive opportunity to to benefit from a future appreciation of USD.
"In the short term, there are risks for USD, but over the coming 6-12 months we expect USD to appreciate by 8-10% from the current level."
15:31: Speculators start to love the pound
The latest IMM Commitment of Traders report has shown the currency market speculators are falling back in love with the pound.
"Speculators added EUR longs. The TFF report showed hedge funds significantly increased EUR longs while asset managers pared shorts. Speculative shorts were trimmed for JPY, GBP, CAD and AUD. The TFF report shows that hedge funds substantially added to long GBP positions. Hedge fund GBP positioning has completely flipped in the space of eight weeks from -56% of open interest to +44 %. - Gaël Gunubu at Deutsche Bank.
15:20: Buy alert issued on GBP/USD
Matt Weller at GFT has called a Buy on the pound to dollar exchange rate:
"The GBP/USD drifted down to the convergence of bullish trend line support and the 1.60 level before reversing back to the topside this week. The pair just carved out a Bullish Marubozu Candle on the 4hr chart, showing strong buying pressure of this key support zone and opening the door for further strength as we move into the early part of this week.
"To take advantage of a continuation higher, traders could look to buy the GBP/USD below 1.6040, with a stop at 1.5986 (under bullish trend line support and the 1.6000 level) and a target at 1.6140 (ahead of last month’s high). Given the aggressive risk/reward ratio on the trade, readers should also consider moving the stop loss to breakeven on a rally to 1.6090 following entry."
15:13: Carney and a half-baked policy
A scathing attack on the Bank of England's forward guidance policy.
Richard Barwell, senior European economist at Royal Bank of Scotland, says the forward guidance policy followed at the Bank of England is incomplete as it does not map out the route back to normal monetary policy.
14:12: Pound euro exchange rate powers higher
The GBP/EUR exchange rate will be looking to challenge 1.19 again.
Shaun Osborne at TD Securities says:
"German elections and the stronger Chinese PMI have been the main developments for markets so far this week, and those have helped boost higher yielding currencies and put the EUR under a bit of pressure
"For today, Draghi is speaking in front of the European Parliament, and considering he’s likely to reiterate his more dovish tone lately, that could add some pressure to the EUR along with the bit of uncertainty around German coalition talks after the election."
11:47: A bright outlook for GBP
Kathy Lien at BK Asset Management is firmly in the pro-GBP camp:
"Since the beginning of the month, sterling enjoyed a very nice rally but in the coming week we could see more profit taking or consolidation.
"There are only a handful of UK data releases on the calendar this week and most of them are second tier. The most significant report will be Q2 GDP figures but this is a final figure and unlike the U.S., no revisions are expected.
"Next to the New Zealand dollar, we feel that the fundamentals for the UK are the most promising and therefore we still expect sterling to outperform other major currencies."
10:50: More on the GBP/USD forecasts at UBS
For more on the view that GBP is predicted to dominate the USD for the remainder of 2013 please read here.
A nice contrarian view on the case for shorting GBP issued by UniCredit Bank here.
09:16: UBS raise GBP/USD forecast
Gareth Berry at UBS says his bank has raised its forecast for the pound against the US Dollar:
"All things considered, we expect last week’s FOMC meeting will keep the dollar weak for one quarter before its longer-term uptrend can resume. So we revised our short term forecasts across the board overnight.
"Our 1m and 3m GBPUSD forecasts rise to 1.63 and 1.61 respectively (from 1.55 and 1.52 previously)."
08:44: Pound still overbought against US dollar
Any pullback in sterling's levels against the US dollar could be deep on the basis that the currency is technically overbought.
"GBPUSD defends strength above 1.5980/1.6000 before 2Q final GDP numbers due Thursday. After last week’s rally to 1.6163, the pullback to 1.6000 helped to release tensions on the upside. RSI still remains at 70% - overbought region," says Ipek Ozkardeskaya at Swissquote Research.
08:40: Victory for Merkel, no boost to the euro
The pound euro exchange rate is higher as the election results out of Germany well within line of trader expectations.
Angela Merkel’s Christian Democrats won the elections with 41.5%, just under the majority leaving Merkel in obligation to find a partner. The German elections had little impact on the single currency.
08:34: Expect GBP to consolidate
A morning currency outlook note from Emmanuel Ng at OCBC says he is predicting the GBP to consolidate around current levels:
"Despite the recent spate of still somewhat supportive data releases (weak retail sales from last week notwithstanding), the pair may consolidate around current levels pending broader dollar cues with the 1.5900 area expected to see initial support on any weakness."
08:30: Still bullish on the GBP
At the start of a new week we get a bullish assessment of GBP from Gareth Berry at UBS:
"Resistance is at 1.6179, a break above which would open the way to 1.6381. Any downside will be a correction, with support at 1.5883."