Pound Sterling on Thurs 26th: Deutsche Bank calls to sell the pound and the euro against the dollar

The British Pound Sterling (Currency:GBP) continues to maintain an overall bullish position on the global currency markets. GDP data from the ONS showed a disapointing revision lower for the year-on-year growth figure which has seen Sterling head lower. How long will this impact sterling for and will positive momentum be able to reasert itself?

• The pound to euro exchange rate is trading 0.1 pct lower; GBP is at 1.1878.
• The pound to US dollar exchange rate is 0.24 pct lower at 1.6043.
• The pound is 0.5 pct lower against the Australian Dollar at 1.7085.
• The pound sterling is 0.72 pct in the red against the New Zealand dollar at 1.9370.

15:47: Interesting hours ahead for the US dollar

The key theme over the remainder of the week is likely to be that concerning the US dollar and political wrangling over the US debt limit.

Omer Esiner at Commonwealth Foreign Exchange says:

"The mounting uncertainty ahead of a looming fiscal showdown in Washington is keeping investors wary of holding dollar assets. A political impasse over keeping the government running could result in a shutdown of basic government services if a “continuing resolution” is not passed by Monday.

"The fact that lawmakers cannot agree on a way to simply keep the government running, does not instill much market confidence in their ability to tackle issues that would actually improve the state of the nation’s economic recovery.

"While uncertainty remains relatively high, a deal to keep the government running should ultimately benefit the dollar."

15:07: Four reasons why the British Pound Sterling is forecasted to fall

We bring you the views held by Deutsche Bank analyst George Saravelos who has the British Pound Sterling as a Sell target. Read on….!

14:49: We are not believers in the British pound rally say Deutsche Bank

George Saravelos at Deutsche Bank thinks GBP has gotten ahead of itself:

"We are not believers in the sustainability of the sterling rally. UK data surprises are at extremes helped by the weather, positioning has cleaned up, and conditions are not in place for a sustained improvement in flows. We’re neutral EUR/GBP due to our bearish EUR/USD view."

14:45: Two Reasons to Sell the Euro

Deutsche Bank admit to having pulled the trigger prematurely on the Euro since February.

However, now they are more confident on their called based on the following two reasons . . .

14:15: Sell the pound against the US dollar

Leander Dreyer at Jyske Bank says the pound / dollar should be sold based on the following:

"We recommend investors to SELL with take/profit at 155.15. Stop/loss at 161.85. The uptrend is clear (see graph), but there is room for a downward correction towards at least 158.50. We recommend that investors adjust stop-loss to entry when GBP trades below 158.25."

13:35: UK can't justify this strong currency

Stephen Gallo at BMO Capital Markets considers the implications of a strong pound sterling in relation to today's current account data saying current GBP strength is problematic:

"Relative to many Euro Area countries, the UK is an economy non-residents like to invest in. It’s innovative, entrepreneurial, liberalised and the government takes a relatively ‘hands-off’ approach. Therefore, a financial account surplus can at times drive the current account deficit, if inward investment triggers more growth and domestic demand at home.  

"However, what the weak business investment spending data suggest is that only a very small portion of the UK’s current account deficit is actually being driven by trade flows which will support better, more sustainable growth over the long-term.  

"As time passes, this fact should remain an important mitigating factor on GBP strength unless it is corrected. it’s difficult to see how Britain’s external position will improve much if the trade-weighted value of the GBP continues to rise over time.  As it stands now, virtually every piece of data you would want to be firm in order to justify as strong currency just isn’t."

12:49: Pick up sterling on the dips

According to Ipek Ozkardeskaya there is no reason to bet against sterling at this stage:

"GBPUSD has caught a slight bid rallying to 1.6092, above our trigger at 1.6068, and looks to be ready to retest the 1.6163 top. 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, with our next target 1.6179 then 1.6343."

11:33: Sterling should remain on the front foot

In addition to the below comments Schlossberg says today's slip up is unlikely to halt Sterling:

"Although tonight's data was a disappointment for cable bulls, the GDP and CA news is backward looking and is unlikely to have any sustained impact on the pair. As long as UK economy continues to operate at the present pace, cable should remain well bid and outperform its peers."

11:26: Current account deficit main culprit for GBP decline

According to Boris Schlossberg markets were more concerned by the current account deficit than the GDP revision:

"Cable (GBP/USD) was slapped to the downside as well after UK GDP data failed to show any upward revisions. Q2 GDP came in at 0.7% as expected but Q1 readings were reduced by 7.3B GBP and more importantly the the current account data saw a wider than expected gap of -13B vs. -11B eyed.

"Pound dropped on the news hitting a low of 1.6035 after failing to clear the 1.6100 barrier just ahead of the release."

10:03: Staying positive on Sterling

Emmanuel Ng says he remains positive on the outlook for the pound sterling:

"We stay positive on the GBP-USD with resistance levels largely unchanged around 1.6120 and 1.6165 while supports are still seen at 1.6000 before 1.5960. Elsewhere, we heavy dovish on the EUR-GBP with the cross still contemplating the 0.8400 floor."

09:32: Sterling slips as Year-on-Year GDP revised lower

UK Q2 GDP (3rd estimate) +0.7% QoQ unchanged and in line with expectations. But, YoY revised down to 1.3% from 1.5%.

The UK current account deficit comes in wider than expected at -13BN GBP. Analysts had forecast -12BN GBP.

Sterling heads lower.

09:02: GDP stats at the bottom of the hour

Look for a release of +1.5% Year-on-year for the second quarter. Gross GDP, quarter-on-quarter is predicted at +0.7%.

Also watch out for the current account stat. Markets expect a reading of £-12.000B.

08:55: Forecasting gains against the Euro, resistance ahead vs US Dollar

Gareth Berry at UBS says gives his pound sterling forecasts:

EUR:GBP: "Focus on the momentum tools which are threatening to cross lower within a bearish trend, signalling scope for more weakness to 0.8353 and then onto 0.8285. Resistance is at 0.8471."

GBP/USD: "Focus is on resistance at 1.6163, a break above this would open 1.6381. Support is at 1.5956 ahead of 1.5883. Resistance is at 1.6073 ahead of 1.6163."

08:50: GBP pulls back vs Aussie and Kiwi

This week has seen some decent gains made against the New Zealand and Australian dollars. This morning we see the UK currency pullback off recent highs.  

Sean Lee at FXWW says the bears could push AUD lower:

"GBP/AUD was a notable mover, moving up toward recent highs at 1.7160.

"The NZD was the main mover over the last 24 hours, giving up quite a lot of ground against most of the other major currencies and this in turn has had an effect on the AUD, which has also slipped on the crosses.

"I think the bears might have a try at pushing the AUD lower, especially if stockmarkets stay soft and AUD/JPY attracts more sellers."

08:45: Thursday morning's major FX themes

Emmanuel Ng at OCBC Bank fills us in on currency market action over the course of the past 24 hours:

"Amidst US budget concerns, the dollar traded with little universal conviction on Wednesday, ending higher against the Europeans (EUR, GBP, and CHF) but softer against the antipodeans as well as the JPY.

"Markets may have been attempting to vote with their feet (or fingers) with G10 currencies experienced a faint fissure, with the EUR and the GBP generally outperforming across G10 space while the growth-linked currencies (CAD, AUD, NZD) trailed their counterparts."