British Pound (GBP): Forecasting 1.7 for GBP/USD, Sterling Outlook Remains Positive
The British pound sterling (GBP) has seen its impressive ascent halted; however support remains firm. We consider the outlook for the UK currency and draw on the latest long and short-term forecasts as they arrive on our desk.
Latest day-on-day spot exchange rates to reference
The pound to euro exchange rate (GBP/EUR): 0.02 pct lower @ 1.201. The inevitable rejection of 1.2 takes shape, but bias remains higher.
The pound to dollar exchange rate (GBP/USD): 0.01 pct lower @ 1.6342. Still holding above 1.63.
The pound to Australian dollar rate (GBP/AUD): 0.1 pct down @ 1.7944. AUD continues to hold firm after a poor first half to the week.
The pound to New Zealand dollar rate (GBP/NZD): 0.31 pct lower @ 2.0077. Holding the psychologically important 2.0 NZD level.
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14:48: GBP/CAD rally runs into problems
@12:16 we mentioned how attractive the rally in GBP/CAD looked. However, fresh data out of Canada could put the rally in jeopardy.
FX Market Alerts note:
"Any hopes for an immediate test on 1.0600 in USD/CAD will now have been dashed on the higher than expected Canadian GDP print for Q3, with 2.7% the upper end of the consensus range. Even so, we see bids coming in ahead of the 1.0550 level, as the longer term USD view seems to hold up better here than in most other currencies pairs - ironically, given that Canada seems to be faring well in the current economic climate and is closely linked to the US' fortunes. EUR/CAD tested the recent 1.4440 highs, but stopped some 5 ticks short of this, hitting lows in front of 1.4360 not too long ago."
13:51: A bullish technical classical formation sees upward bias maintained
Commenting on GBP/CAD are ICN Financial:
"The pair touched 127.2% Fibonacci level at 1.6370 then slightly dropped. But the current slight downside move is still limited above Linear Regression Indicators and the previous top at 1.6259 favouring the possibility of keeping the upside move valid, Trading above the referred to top is positive, but breaching 1.6370 could trigger a strong bullish rally today. We hold on to our positive expectations supported by the bullish technical classical formation showing on graph."
13:08: EUR/GBP bearish bias remains favoured
More from Luyet at MIG Bank, this time on the outlook for the EUR/GBP:
"EUR/GBP is trying to bounce close to its support at 0.8301. However, the recent succession of lower highs favours a bearish bias. Hourly resistances stand at 0.8391 (26/11/2013 high) and 0.8416 (14/11/2013 high).
"The long-tern declining channels favour a bearish bias. Further declines towards the supports at 0.8225 (28/12/2012 high), potentially 0.8082 (01/01/2013 low), are expected."
12:16: Keeping an eye on GBP/CAD - new highs ahead
The Canadian dollar continues to struggle, and GBP/CAD has been on a clear path higher.
Stephen Gallo at BMO Capital says:
"In Canada today the main focus will be the September GDP data due at 13.30 GMT. USDCAD continues to hold up very well, and any weakness in today’s data should be the catalyst for a break through the strong resistance and year highs near 1.0600/1.0625.
"This does not mark any change of the overall view for us here. We still think the CAD will remain weak into year end and Q1 2014, looking for a slow grind towards 1.0800. EUR/CAD and GBP/CAD are close to fresh highs for this year too, and we still favour buying dips in both of those crosses for now."
11:42: Forecasting 1.7 for Cable
A really bullish technical forecast for GBP/USD from MIG Bank's Luc Luyet:
"GBP/USD has broken the key resistance at 1.6260. An hourly support can be found at 1.6258 (intraday low). Another support lies at 1.6134 (25/11/2013 low).
"In the medium-term, the break to the upside of the multi-month consolidation is positive. However, monitor the test of the strong resistance at 1.6381 (02/01/2013 high), given the deep overbought conditions.
"A decisive break of the major resistance at 1.6381 would open the way for a further longterm rise towards the strong resistance at 1.7043 (05/08/2009 high)."
11:10: UK M&A inflows stagnating, Eurozone's picking up
A fundamental underpinning of the exchange rate markets is the flow of money from one currency area to the next. Some insightful data has been presented by Deutsche Bank on the flows around Merger & Acquisition (M&A) activity. This could give insights as to why GBP/EUR is struggling to break higher.
Deutsche's George Saravelos says:
"Outflows from US stood around USD -17bn over the last three months and -52bn YTD. Eurozone inflows are now speeding up, with USD 15bn on 3-months basis and USD 59bn on YTD.
"UK inflows are stagnant and are almost flat on three month basis. Meanwhile Switzerland outflows have also ceased on three month basis. Outflows from Japan are now speeding up and outflows from the country are the second highest in G10 economies. Its outflows stand around USD -9bn on three month basis and USD -30bn on YTD. Combined with the recent rise in bond outflows from the country, this should be supportive of a weaker yen."
11:02: Liquidity remains low, consumer confidence numbers push GBP down
Alex Edwards at UKForex gives further insights into the current state of GBP, regarding yesterday's Carney speech, "there was nothing obvious in his speech that supported the pound’s move higher though.
"Moreover it was a reaction to some solid bids and a move through stops in thin trading conditions – this has helped cable trade to an overnight high of 1.6370. Consumer confidence data released overnight from the UK came in weak and that has seen GBP/USD drop back to open this morning at 1.6330. Liquidity remains low today, as most Americans are likely to take today off work following Thanksgiving on Thursday."
10:31: GBP to remain firm
Even the usually dovish UniCredit team see sterling remaining supported:
"The BoE ending FLS mortgage incentives further boosted sterling and GBP-AUD and GBP-NZD hit 3Y and 17M peaks, respectively. We expect sterling to remain broadly firm for the time being."
10:26: GBP/USD downside is limited
Ipek Ozkardeskaya at Swissquote Research gives her forecast for the UK currency:
"GBPUSD rallied to 1.6374 (couple of pips below the year-high of 1.6381); break of 1.6350 triggered heavy stops on the upside. The pair remained well bid above the upper-Bollinger band (1.6334) yet the faster-than-growing nationwide house prices (6.5% y/y vs. 6.2% exp. & 5.8% last) weighed on the Cable as Europe walked in.
"The downside should remain limited as BoE Governor Carney took an important step announcing the dilution of credit-boosting program - which is the first stimulus withdrawal since 2007 - to prevent a potential housing bubble in UK."
10:00: The year's highs are still within reach
Lloyds Bank Research see GBP strength limited at 1.64:
"The year’s highs of 1.6381 in GBP/USD are within reach and even though the GBP strength in the last few sessions has had little immediate fundamental support, the underlying strength of the UK data in the last few months and the rise in UK yields that has come with it makes it very hard to oppose GBP strength.
"Having said this, the slightly softer tone to the latest set of UK numbers means it is hard to look for too much of an extension to GBP strength from here, so even though we could easily see a break to new highs for the year by the end of today, we would not expect much further near term GBP/USD strength beyond 1.64."