GBP LIVE on 25/10: How will the UK currency react to today's GDP data?
The British pound sterling (Currency:GBP) will today be a slave to the release of third quarter GDP data. Ahead of the release we consider the possible reactions. We will of course bring you the release and the subsequent price action as well as the reactionary market commentary.
Spot rates:
The pound to euro exchange rate: 0.2 pct lower at 1.1717.
The pound to dollar exchange rate: 0.22 pct lower at 1.6166.
The pound to Australian dollar rate: 0.2 pct higher at 1.6872.
The pound to New Zealand dollar rate: 0.62 pct higher at 1.9517.
The pound to Rand exchange rate: 0.32 pct higher at 15.8649.
NB: All quotes here are taken from the spot markets; your bank will affix a discretionary spread to the numbers. However, an FCA-regulated independent FX provider will undercut your bank's offer, thus delivering you up to 5% more currency. Please learn more here.
Next week: The action only really starts on Friday
For GBP watchers next week should be dull. GBP will likely be prone to technical considerations, momentum trading and other unfathomable factors!
However, Friday sees the start of the next round of PMI data releases.
Markets will be looking to see whether the strong momentum of Q3 is translating into Q4.
Markit Manufacturing PMI (Oct) is predicted to read at 56.5, down on last month's 56.7. So markets are looking for a degree of cooling.
Visit us again on Monday for our live coverage of the UK currency.
16:40: Backing further gains against the Canadian dollar
The momentum for the pound vs Canadian dollar is picking up says Shaun Osborne at TD Securities:
"New cycle highs for GBP/CAD this week—and a pick up in bull trend momentum on the daily charts after a long period of trendless and choppy range trade—is encouraging from a broader point of view. The stop/start nature of the recent GBP rally is underscored again by weak intraday price action today (potential daily “shooting star” candle).
"Corrective losses should remain limited in the near-term, however, and we look for the pick up in trend momentum across a range of timeframes to limit GBP losses from here. We see support in the mid/upper 1.66s. The 1.6500/10 area is major support now. Buy dips."
16:20: This is NOT the time to go long on Euro
Bilal Hafeez at Deutsche Bank on the strength of the euro and whether it is is a trend worth backing:
"We may have underestimated the chances of euro strength on the back of equity inflows and narrowing cross currency basis, but we view the time is not right to go long. The move higher in EUR/USD has lacked investor participation and is out of line with growth and relative equity flows."
16:04: British pound comes under pressure
The British pound has come under pressure as we move into the final session in London. In the absence of any triggers we expect profit takers finally pressing the sell button.
14:59: Dips in the GBP/USD will be met with buying interest
Omer Esiner at Commonwealth Foreign Exchange foresees continued appetite for cheap GBP:
"Much like the euro, the pound’s upside against the dollar may be somewhat limited far above current levels. However, any decline in the pound is likely to be met with renewed buying, especially with the outlook for the Fed to remain sidelined until sometime in the Q1 2014."
14:37: Traders urged to keep clear of GBP/USD
Matt Weller at GFT on why he is steering clear of the GBP/USD pairing:
"The GBP/USD also inched higher yesterday before turning lower in today’s early European session trade. Rates remain within the recent 1.6115 – 1.6255 range, and while today’s U.S. economic data could inject some volatility into the pair, technical traders may be best served by remaining on the sidelines until the pair moves toward one of the extremes of the range."
14:35: GBP ahead vs New Zealand dollar
More good gains for the under-priced GBP/NZD today.
Shaun Osborne at TD Securities tells us why:
"The NZD is the worst-performing major currency on the day, reflecting risk aversion and comments from RBNZ Governor Wheeler that efforts to restrain housing were working and this mean that the bank could delay a hike in the OCR.
"We still feel that stimulus will have to be withdrawn over the course of 2014 so losses in the NZD are likely to be limited near-term. Wheeler also commented that the RBNZ will intervene if it sees an opportunity to create uncertainty about the future direction of the exchange rate (add some two-way risk to price action) but did not think there was an opportunity to do so at the moment."
11:51: The outlook for EUR/GBP and GBP/USD from here
Kathleen Brooks at Forex.com has given her predictions for the pound vs euro and dollar in the wake of today's GDP data release:
"Going forward we believe that GBP will be sensitive to any UK data misses, however we think that downside could be limited as the market concentrates on 1, the weak tone to US data and 2, the relative interest rate differential, which remains pound positive, as the market concentrates on the BOE’s sanguine stance after the market successfully challenged the Bank’s dovish forward guidance. So GBPUSD could be range bound for some time.
"From a rate perspective, EURGBP is more interesting as the ECB remains unlikely to loosen policy any time soon. From a technical perspective it looks ripe to outperform the pound if it can get a weekly close above 0.8535 – the 200-day sma. Above here opens the way to 0.8600 – the high from the end of August. If the UK starts to see economic data start to slip then economic fundamentals could also start to support EURGBP."
11:23: Just how bullish are traders on the euro and pound?
Dukascopy give a great insight into the pressures behind the major currency pairs allowing traders to position accordingly. We see EUR/USD is highly bullish while GBP/USD is more mixed:
If you want an answer to the question "Why is the euro so strong?" we have given an insight here.
10:06: That's that then!
GBP sinks back to levels seen prior to GDP release. Have markets already had their fun for today?
10:02: Currency market reactions to GDP data
"Relief bids in cable, or markets 'buying the fact' as GDP prints as expected. Stops lined up above 1.6250." - UKForex.
"GBPUSD eyes 1.6240 on UK GDP" - FX Street.
"UK GDP - I believe that this will be the “high-water mark” for the UK economy for now. Growth at these rates is unsustainable." - World First.
09:44: That stubborn mule won't budge!
There is no moving the euro it would seem (see comment @ 08:45)… the GBP/EUR is unchanged on yesterday at 11739, so as yet the GDP release hasn't precipitated a relief rally.
09:36: GBP gaps higher on GDP
The UK currency has reacted favourably to today's GDP data release which came in line with expectations.
Here is the reaction by GBP/USD:
09:30: GDP in line with expectations
UK GDP Q3 = 0.8% vs 0.8% expected and 0.7% prior
09:23: Key areas ahead of GDP release
Ipek Ozkardeskaya at Swissquote Bank:
"Any positive surprise should give fresh boost to GBP-bulls before the weekend. The key resistance sits at the monthly double top 1.6260, then 1.6280 upper-Bollinger band. For any close above 1.6160, the MACD 12, 26 day indicator will step in the bullish zone."
08:52: What will the impact of today's GDP data on sterling be?
"We think the market is hopeful of a strong number and the price action overnight suggests this is somewhat priced in. A print in line with expectations will be supportive for GBP. A better than expected number should see another test of the recent 1.6260 high in GBP/USD. But should we get a marginally softer print, growth of 0.7% q/q is still decent and will be better than the US and Eurozone. We expect GBP downside to be limited and would see any dips in GBP/USD as buying opportunities." - Lloyds Bank Research.
08:45: EUR/GBP outperformance a function of EUR strength, not GBP weakness
Lloyds Bank Research on the recent rally in the euro / sterling exchange rate:
EUR/GBP has been edging higher over the past few sessions, breaking above the 200day moving average. However, this is arguably due to EUR outperformance than GBP underperformance, with GBP having made gains against the high-yielders.
08:36: UK GDP data to drive GBP in morning section
Friday brings us UK Q3 GDP numbers, the market's median forecast is 0.8% q/q, however looking at the breakdown of the survey the mode is 0.7% q/q.