British Pound Sterling on Tues 24 Sept: GBP Outlook Technically and Externally Driven as UK Calendar Thins
The British Pound Sterling (Currency:GBP) will be driven by external factors today owing to a thin UK domestic calendar. The technical output for the British pound continues to broadly favour the UK currency and we will consider the key levels to watch out for. [Please see live coverage of Labour conference here.]
Exchange Rates Today:
- The Pound Sterling to Euro (GBP/EUR): 0.34 pct lower at 1.1850.
- The Pound Sterling to Dollar (GBP/USD): 0.5 pct lower at 1.5963.
- The Pound Sterling to Australian Dollar: 0.14 pct higher at 1.7038.
- The Pound Sterling to New Zealand Dollar: 0.62 pct higher at 1.9497.
PS: These are wholesale market quotes, your bank will charge a discretionary spread to the figures. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.
16:31: UniCredit suggest shorting the Euro vs the US Dollar
An interesting one for the Euro watchers - a note just in from Dr. Vasileios Gkionakis at UniCredit Bank:
"We initiate a tactical short EUR-USD trade, with a spot reference 1.3481, a target of 1.3300 and a stop loss of 1.3570.
"GBP is roughly were it was trading pre-FOMC, while AUD and NZD have retreated significantly since their post-FOMC peaks of 0.9528 and 0.8435 respectively. Most CEE currencies too have paired gains. On the other hand EUR-USD has lagged in this correction and we feel that this gap is likely to close."
"Market expectations for the upcoming US ISM stand at 55.6; combining this with the flash Euro zone manufacturing of 51.1 and using our relative measure of EZ / US PMI points to a EUR-USD level of around 1.33 in the short-term."
15;14: UK's opposition heads left
Neil Gadhok, consultant at Insight Public Affairs, gives us a succinct summary of Labour leader Miliband's ongoing speech:
"This might be the most left wing speech I've heard from a Labour leader in the last decade." Watch live here.
15:10: Don't read too deeply into today's foreign exchange market price action
Stephen Gallo at BMO Capital Markets warns those who would look to be taking directional cues from today's foreign exchange market price action:
"Flows this morning in London were rather indiscriminate, unfortunately, but this should have probably been expected, given the lack of clarity on so many different levels.
"Nevertheless, were the FX space to toy with positioning or make minor adjustments today and from this point forward, these ‘gaps’ are perhaps instructive as to where participants might be looking for opportunities.
"We don’t believe the price this morning in London represented anything more than participants trying to find their balance in a very uncertain world, attempts to profit from momentum-driven price action and perhaps a little bit of early month-end flow too."
14:54: Still bullish on GBP/USD
Ipek Ozkardeskaya is still bullish on GBP, could today's decline be providing traders with a good buying opportunity?
"With GBPUSD comfortably in a expanded uptrend channel , thin supply zones above and momentum indicators in bullish territory we remain bullish. We would buy on dips, 1.6068 / 75 key bullish trigger with our next target 1.6179 then 1.6343."
13:17: GBP deep in the red vs USD and EUR as Miles backs UK economic recovery
The sterling sell off against the US dollar and euro continues on Tuesday.
This as we hear what should be pro-GBP commentary from MPC member David Miles.
Miles is widely seen as the most pessimistic members of the MPC, so this is interesting.
Miles said in a speech in Newcastle today that he is "now more confident that we are on path to recovery than at any time since I joined the MPC in the first part of 2009”."
He believes forward guidance is sufficient and, "the recent rise in activity and confidence has the potential – I believe – to be sustainable and self-confirming."
11:46: BBA loans miss target, but we are seeing buying opportunities on GBP
Ipek Ozkardeskaya at Swissquote Bank on a British pound that is under pressure against the USD and EUR today:
"In the UK, the BBA loans for house purchases missed the market estimates, pulling the GBP-complex lower in the morning. GBPUSD sold off to 1.5975, EURGBP spiked to 0.8449.
"The pullback to pre-FOMC levels may signal a deeper correction in cable, however the momentum is still on the upside giving us dip-buying opportunities before the growth report due on Thursday."
11:21: Latest from the Labour Party Conference - Miliband to speak soon
On the political front we have Labour bandying about some interesting ideas.
The Federation of Small Businesses welcomed the call to cut business rates saying that a situation where business pay more in rates than rents is surely absurd.
However, analysts in the City are a little concerned with calls to raise corporation tax for the largest UK companies.
Watch the speech, and preceeding speakers live here.
10:27: Euro misses out on an opportunity to advance vs sterling
Sasha Nugent at Caxton FX says the Euro has forfeited its chances for a comeback against sterling:
"Today’s main event was the German IFO business data, and with figures below expectations the euro may have forfeited its opportunity to strengthen against sterling."
Despite this observation we note that sterling continues to ceded ground to the shared currency and the US Dollar through the morning's session.
09:14: New Zealand dollar weakness
GBP is enjoying some good gains against the New Zealand currency.
Sam Tuck at ANZ Bank says:
"What's been seen of late is there has been a disconnect between the Australian dollar and the New Zealand dollar's performance post the taper, or non-taper, event last week, where the Australian dollar declined most of its taper gains but the New Zealand dollar held on to all of the gains.
"It's retracing those steps slightly, coming back to around the 88c level against the Australian dollar, where it was trading before the Fed tapering event last week."
NEVERTHELESS. Be aware that the NZD is predicted to be a winner in G10 FX… read our report on the matter here.
09:03: German business climate data underwhelms
IFO - Business Climate (Sep): Reads at 107.7, analysts were expecting 108.2.
IFO - Current Assessment (Sep) Reads at 111.4, forecasts were for 112.5.
IFO - Expectations (Sep): Reads at 104.2, forecasts were for 104.0.
Despite the disappointment the pound / euro exchange rate is unchanged. We would suggest underlying corporate flow pressures on the pound are the key drive at play at present.
08:39: Pound to Euro exchange rate awaits German IFO survey data
For those with an eye on the pound euro exchange rate we have some data out of Germany at the top of the hour.
"Yesterday’s PMI data for both Germany and the euro area as a whole was mixed, with services stronger than expected but manufacturing weaker. However, even the latter pointed to a continued rise in output. We expect today’s German IFO survey to show the economy continuing to strengthen towards the end of Q3." - Lloyds Bank Research.
IFO - Expectations (Sep) forecast at 104.0.
IFO - Current Assessment (Sep) forecast at 112.5.
IFO - Business Climate (Sep) forecast at 108.2.
08:35: Pound to Dollar exchange rate highly dependent on Fed speak
The outlook for the pound / dollar exchange rate is likely to be determined by US Fed speakers.
Lloyds Bank Research tell their clients:
"Today’s August consumer confidence numbers are unlikely to tell us anything new. Other surveys suggest confidence slipped in August, although the level is still relatively high. Given the current confusion over policy there will be a lot of interest in FOMC speakers over the next few weeks.
"Today’s comments by Governor Stein are of particular interest as he has warned in the past of the potential downside risks of QE. For unspecified reasons Vice Chair Janet Yellen has postponed next week’s scheduled speech in New York."
08:29: Euro and US dollar in a race to the bottom
Mark Lee at FXWW spells out a pro-GBP theme amongst technical traders:
"EUR/GBP is also still solidly in a bear trend and selling rallies is heavily favoured;
"Market focus is returning to the EZ banking sector and renewed ‘flight of funds’ from the EZ to London or Zurich cannot be discounted;
"EUR/USD remains in a bullish trend but has lost momentum.
"My medium-term sense is that the EUR and the USD will re-ignite their race-to-the-bottom."