GBP LIVE 28/10: Technical Forecasts + CBI Distributive Trends Data to Drive UK Currency on Monday
The British pound sterling (Currency:GBP) will today be at the mercy of the second-tier data due for release by the CBI - the Distributive Trends Survey. This really is second-tier so the focus will be on the broader market trends, US dollar strength, technical forecasts, and money market flows. We will be updating our coverage as and when we receive and process the latest viewpoints from across the forex market place.
Wholesale rates @ time of last update:
The pound to euro exchange rate: 0.05 pct lower on Friday's close at 1.1706.
The pound to US dollar exchange rate: 0.15 pct lower at 1.6140.
The pound to Australian dollar: 0.05 pct lower at 1.6862.
The pound to NZ dollar: 0.28 pct lower at 1.9481.
Note: The above quotes are from the wholesale markets; your bank will subtract a discretionary spread from when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering up to 5% more currency. Please learn more here.
17:30: What the rest of the week holds for sterling
Kathleen Brooks at Forex.com:
"In the UK all eyes will be on household borrowing released on Tuesday 29th, which is expected to show an increase in consumer borrowing to GBP1.3bn for mortgages from GBP 1bn in August, and net consumer credit is expected to rise to GBP 0.7bn from GBP 0.6bn. Money supply and house prices are also worth watching.
"At the end of the week we get PMI manufacturing for October, which is expected to moderate slightly to 56.4 from 56.7 in September. A weaker than expected manufacturing PMI could hurt the pound, which declined on Friday after Q3 GDP was in line with expectations at 0.8%."
16:49: Expect currency market volatility to increase over the next three days
We see the pound sterling has dropped and given up earlier gains over recent hours.
This fits in with the expectation that currency market volatility will likely increase as markets position themselves for the outcome of the Fed policy meeting and decision.
Alex Conroy at Spreadex says:
"US stocks are trading down this afternoon with investors presumably positioning themselves for tomorrow’s Fed policy meeting. General consensus seems to be that the Fed will avoid tapering now until March following the recent government shutdown, disappointing September jobs data and the more dovish Yellen being announced as the next Chairwoman of the Federal Reserve. Expect volatility over the next couple of days as speculators attempt to forecast the outcome of the meeting and overreact to any announcements made."
15:09: Speculators can't make up their mind on GBP
A look at the latest sentiment amongst currency market speculators by the CFTC shows them to be well balanced on the British pound; this could certainly aid some stability to the UK currency:
14:19: As currency markets consolidate, EUR starts looking expensive
Greg Moore at TD Securities says the EUR is now certainly in overpriced territory:
"G-10 currencies are in consolidation mode at the start of the week. The FOMC mid-week may be curtailing activity though the meeting is not expected to produce any significant developments on the policy front.
"EUR/USD is holding around 1.38, just under the year high reached late last week; portfolio shifts may be boosting the value of the single currency temporarily but the divergence between spot and fair value estimates (based on short-term rate spreads, we estimate EUR/USD “fair value” to be closer to 1.3350) and the shift in option risk reversals might be starting to make EUR downside positioning attractive again."
This has obvious implications for the future of the pound to euro exchange rate.
13:40: Euro looks technically 'beautiful' - BUT serious resistance at current levels
Boris Schlossberg at BK Asset Management ponders the possibility of the Euro consolidating this week despite the overwhelmingly bullish setup behind the currency.
And why is the British pound not able to rally at these inter-year resistance levels?
Your must watch weekly forecast video:
13:23: GFT staying Neutral
Matt Weller at GFT says the despite today's uptick in GBP/USD the rate is actually still in the middle of its recent range:
"The GBP/USD has turned modestly higher in quiet trade so far today, ticking back above the 1.6200 round handle. Nonetheless, last week’s 1.6115-1.6255 range is still the dominant technical formation to watch, and with rates roughly in the middle of that range, the bias on the pair is neutral for now."
12:35: Reason to stay cautious on GBP/USD
"In the longer term, prices are close to the strong resistance area between 1.6302 (30/04/2012 high) and 1.6381 (see also the longterm declining trendlines). Given the increasing overbought conditions, we would be mediumterm cautious on GBP/USD, as it has already priced in a lot of positive news." - Luc Luyet at MIG Bank.
To replicate the chart feel free to use our free customisable charts here.
11:01: A big miss on the CBI Distributive Trades Survey
CBI Distributive Trades Survey read at 2. Analysts had expected 33.
However, GBP is unchanged, in fact it continues to trade in firm fashion.
11:00: GBP consolidating, forming diamond pattern vs USD
"Pound is still consolidating; the market has formed the right part of a diamond pattern. We think, today the price may break the pattern upwards and continue growing up. In this case, this ascending structure will be considered as the central part of another pattern from the daily chart. The target of this central part is at the level of 1.6475." - RoboForex.
10:03: Selling pressure building?
Ipek Ozkardeskaya warns on the potential for GBP/USD being at overextended levels:
"In UK, house prices accelerated at the faster pace of 3.1% y/y (vs. 2.4% prev), according to the Hometrack housing survey. GBPUSD closed the week right above our 1.6160 trend reference, the trend momentum is still slightly positive. Option bets are mixed 1.6155/70, yet the selling pressure is building given last week’s failure to break above the monthly double top of 1.6260. Key support is seen at 1.6104 (21 dma) & 1.6086 (mid-Bollinger band)."
09:22: Euro/sterling runs into resistance
ICN Financial have noted the euro has run into stiff resistance against the GBP; hence part of the reason behind today's declines:
"The price has retested the 200-days SMA and was rejected from the 50 percent retracement level for the overall bearish wave as shown on chart. Accordingly, so long as 0.8550 (GBP/EUR support @ 1.1695) resistance level is holding a bearish attempt will remain likely."
08:45: UK businesses getting healthier
According to the latest Begbies Traynor Red Flag Alert research for Q3 2013, which monitors the financial health of “Corporate UK”, levels of ‘Critical’ financial distress among UK businesses continue to fall albeit at a slower rate, decreasing 2% on top of last quarter’s 9% reduction; with improving consumer confidence making up for subdued summer trading within the UK’s core services sectors.
Across all sectors, UK businesses experiencing ‘Critical’ financial problems reduced 2% from 3,001 in Q2 2013 to 2,951 in Q3 2013, supported by significant improvements in the UK’s consumer-facing industries including Bars & Restaurants, Hotels, Food Retailing and General Retail, which all experienced marked reductions in businesses suffering ‘Critical’ distress, falling 30%, 21%, 16% and 8% respectively.
08:11: It's risk-on!
"It's classic risk on at the start of the European session: JPY is weaker, AUD, NZD are stronger while GBP, EUR and USD are mixed." - Forex.com.
08:07: CBI Distributive Trends due, UniCredit remain bearish GBP
Long-time GBP bears UniCredit continue to advocate for further sterling downside today:
"UK CBI reported sales are expected to have slightly declined in October and are likely to support the idea that cable may continue to have difficulties to rally much above 1.62 and will gradually retreat. In turn, EUR-GBP is expected to progressively bounce back above 0.86."
08:00: Lloyds Bank forecast positive trading for GBP
Lloyds Bank Research give us their key levels for consideration:
"GBP/USD once again failed to break the 1.6260 level on Friday despite an attempt after the GDP data. Even so, we remain positive on GBP, and expect that we will see a break of this level before long.
"While the GDP data was in line with expectations, it was still objectively strong and would have been stronger still had it not been for weak electricity and gas output, which can be expected to correct in Q4.
"In addition, the sharp rise in inflation expectations shown in the latest YouGov survey will create some concerns that the BoE’s “knock-out” clause allowing a rate hike before unemployment reaches 7% could be triggered, although it will take more than one month’s sharp rise to create any real concerns at the BoE, especially since the latest rise may well represent a reaction to the latest energy price increases and house price concerns, and may well turn out to be temporary.
"Still, the strong UK data and the rise in inflation expectations do mean that it is hard to see UK rate hike expectations falling back from here, suggests the risks remain mostly to the upside GBP/USD should find good support at 1.6120/40."
07:54: Welcome to today's coverage - CBI Distributive trends + technical predictions to dictate today's action
Monday has little to offer the British pound sterling (Currency:GBP) from a data perspective with only second-tier data from the CBI due at 11 AM GMT.
Consensus forecasts are for a reading of 33, slightly lower than last month's 34.