Dollar rate today (28/10): Outlook remains shaky despite Monday morning rally above 1.62
The GBP/USD spot is quoted at 1.6203.
(Note: All 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.)
The US data calendar will be busy this week, but new economic releases are unlikely to alter the market view that Fed tapering will be delayed to 2014. The USD is thus likely to stay broadly on offer again.
"The USD stabilised in the second half of last week, and the USD index held above the 79 area of support, but the risks still seem to be mainly to the downside as we anticipate the raft of delayed US data that is hitting us this week," say Lloyds Bank Research.
According to Lloyds, while most of this data should not show any shutdown related distortions, the risks for US data will generally be seen to be to the downside as weak September data is unlikely to be offset by any recovery in October given the shutdown.
"Today’s industrial production isn’t typically the most market-moving of releases, but risks may ion any case be slightly to the downside of the 0.4% median," says a note from the bank.
However, the most closely watched data this week is likely to be ADP on Wednesday. Ahead of that, the 79 area in the USD index seems unlikely to break.
The outlook for the pound dollar rate today: Selling pressure building
Turning to the outlook for the pound dollar, according to Ipek Ozkardeskaya at Swissquote Research the Monday morning rally we are currently witnessing could have shaky foundations:
"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)."
However, Geoffrey Yu at UBS says he remains bullish on the GBP to USD:
"Initial resistance is at 1.6260. A break through which would open the way to the critical 1.6381. Support is at 1.6116."
US Fed to remain key
The market focus is mainly on the Fed and the expectations are rather dovish.
Given the weak jobs data and the recent budget turmoil (still unresolved), the Fed is expected to keep its stance dovish and the tapering of monthly 85bn bond purchases is not expected before the beginning of 2014.
"Walking through the FOMC October meeting, the speculative USD-longs retreated to the lowest since February 2013 according to Oct 1st CFTC data. DXY Index rebounded from the key support of 78.998 on Friday, just a stone’s throw higher than the year low of 78.918," says Ozkardeskaya.