Live Coverage on Friday 18 Oct: GBP Predicted to Maintain Bullish Bias Towards 1.62 vs US Dollar
The British pound sterling (Currency:GBP) is looking solid on Friday morning with technical considerations and 'real money' demand keeping the UK currency well bid. There are no major data events on the calendar for today so we will place further emphasis on the technical levels facing the major GBP pairs for guidance.
Exchange rates as of last update:
Pound to Euro: Up 0.12% @ 1.1835.
Pound to US Dollar: Up 0.2% @ 1.6197.
Pound to Aus Dollar: Down 0.05% @ 1.6771.
Pound to NZ Dollar: Up 0.2% @ 1.9091.
Pound to SA Rand: Down 0.35% @ 15.8568.
Note: These are wholesale inter-bank market rates. Your bank will affix a charge at their discretion, hence why you never receive anything close to the market rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.
16:18: An exciting week ahead for the British pound sterling !!!
Monday is devoid of any GBP-specific drivers, so we will be focusing on the technical levels that will be dictating to traders.
On Tuesday at 09:00 MPC member Bean speaks, don't expect too much by way of GBP action.
At 09:30 the ONS releases the Public Sector Net Borrowing (Sep) stats. Forecasts are for £10.400B to have been borrowed.
Wednesday will most likely be the highlight of the week when this month's MPC minutes are released. Traders will be looking for further comment on forward guidance.
Thursday is also going to be interesting. At 17:45 Governor Carney speaks; these events are always closely watched and we would certainly expect some sterling volatility.
Friday brings the next instalment in the quarterly GDP series - analysts are expecting the UK economy to have grown 1.5% Year on Year in the last quarter.
The Quarter on Quarter stats are predicted to come in at 0.8%.
15:33: Is GBP/USD a one-way bet until 2014?
If the US dollar is only due to make a comeback in 2014, then surely buying GBP/USD is a sure-fire strategy?
Leander Dreyer at Jyske Bank says:
"The changed expectations of the scaling down of QE only once again underline that USD is vulnerable up to year-end - the dollar index is currently hovering at important levels. We probably have to enter 2014 before we can expect a significant USD appreciation."
14:06: GBP Targeting 1.6540 vs US dollar
ICN Financial Markets on their predictions for the pound dollar rate:
"The pair is providing a slight bullish bias and is approaching 1.6200 and the awaited upside move scenario extends today supported by stabilising above 1.6150.
"The trading range for today is among the key support at 1.6000 and key resistance at 1.6340.
"The general trend over short term basis is to the upside as far as areas of 1.5280 remains intact targeting 1.6540."
12:30: Spencer Dale speaks, I mean tweets...
The Bank of England's chief economist Spencer Dale has today warned the GBP bulls that the Bank is very unlikely to raise interest rates next year as it wants to see a period of sustained growth first.
"I think its very unlikely that we will raise Bank rate in 2014. We need to see sustained period of strong growth," Dale said on Twitter.
12:20: Staying bullish on GBP and EUR into next week
Ipek Ozkardeskaya at Swissquote Bank is backing the GBP and EUR into next week:
"The global risk-on environment, the speculations (almost certitude) of Fed not tapering before the year-end, and the anti-Carney bets are likely to keep GBP well supported against USD for the time being. Next week, BoE releases the MPC October meeting minutes expected to remain dovish and already priced in.
"We remain on the long side of the play for a weekly close above 1.6070 – uptrend lower band.
"On EURGBP cross, we continue to remain bullish as long as the price remains over the downtrend channel top (at 0.8420 today). Offers are solid at 0.8490/0.8500 zone."
11:54: Latest short-term forecasts
We have just updated the site with our latest technical outlook note from Emmanuel Ng at OCBC Bank.
11:43: Aus dollar update
For those with an eye on the GBP vs AUD rate, see our latest note on the currency pair's outlook.
11:10: KBC turning optimistic on pound / euro again
In the view of the comment @ 10:30, Piet Lammens at KBC Markets says:
"There are tentative signs that the sterling correction has run its course. A cautious sell-on-upticks approach can be considered. Tight stop loss protection remains warranted in case of a break above 0.8510."
11:04: Trends in Lending data is out, disappointing figures on SME lending
The latest quarterly release of the Trends in Lending data has been released by the Bank of England.
The weakness of SME lending has raised eye-brows, remember SMEs make up 90% of the UK’s total business economy:
- The annual rate of growth in the stock of lending to UK businesses was negative in the three months to August.
- The stock of lending to small and medium-sized enterprises and to large businesses also contracted over this period.
- The annual rate of growth in the stock of secured lending to individuals was broadly unchanged at 0.6%.
- Approvals by all UK-resident mortgage lenders for house purchase and remortgaging rose over the three months to August
10:30: GBP performance against EUR improves, but beware a EUR comeback
While we have seen an improvement in the performance of the GBP/EUR exchange rate, we would caution on just how far this rally could last.
The latest technical note on the EUR/GBP pairing from ICN Financial Markets confirms this:
"The royal pair continued to consolidate near 0.8460-0.8465 regions, while the bullish effect of the previous caught classical pattern is still in play suggesting further upside movements following the re-test of the falling trend line that connected the trend from 0.8770 levels.
"RSI 14 remains stable above the value of 50.00 reinforcing our bullish overview mainly targeting 0.8600 zones. A break above 0.8510 will accelerate."
09:44: OCBC are neutral on GBP
A hint of caution from Emmanuel Ng at OCBC Bank:
"Apart from USD weakness, the GBP-USD was boosted by supportive data releases (retail sales) as well as somewhat hawkish comments from the BOE’s Dale (who noted that the BOE could hike in 2014) on Wednesday. After breaching above 1.6100 on Thursday, cable may consolidate on approach of the 1.6200 ceiling. We remain neutral on the pair pending further cues."
09:25: Where are today's key support and resistance levels?
Dukasckopy run through the key trading levels for today:
09:05: Investors will not test sterling ahead of 1.63
UniCredit Bank today tell clients that they believe momentum will carry the headline GBP/USD pair higher:
"Cable has further benefited from the USD retreat and solid retail sales at home. Prospects of firm UK GDP growth in 3Q13 next week may make investors refrain from heavy book-squaring at present, leaving in turn a retest of the 1.62 area intact in the near term."
08:45: GBP up vs AUD despite solid Chinese data
Positive Chinese news usually provides a boost to the Australian dollar.
However, AUD has been unable to climb against the British unit on Friday despite news that China GDP growth accelerated to 7.8% yoy from 7.5% in 3Q, supported by the stimulus package approved in the summer.
This outcome is in line with the consensus forecast suggesting the Aussie may have already priced the news in.
08:42: US dollar weakness still with us
US dollar weakness is likely to remain a key feature on currency markets today.
"With the fear of economic collapse a long lost memory after the 11th hour passing of the bill the dollar has taken a big hit with investors seemingly looking to more volatile markets to find their profits. The concoction of a likely stalling of Fed tapering and falling US rates combined with relative confidence in Europe the EURUSD has had a great run piercing through two potential resistance levels and is currently trading at 1.3662," says Jonathan Sudaria at Capital Spreads.