- Last Updated: 07 April 2014
Updated: The British Pound (GBP) is stable as we move into the second week of April. Selling on global equity markets has seen some relief being enjoyed against the commodity dollars. Meanwhile, we continue to see consolidation vs the Euro and US dollar.
This period of consolidation will inevitably give the sterling bulls hope that the 2014 rally can ultimately reassert itself.
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Today's Pound Rates.
- £ vs Euro: 1.1948
- £ vs Dollar: 1.3551
- £ vs Australian Dollar: 1.8871
- £ vs Canadian Dollar: 1.7076
- £ vs New Zealand Dollar: 2.0184
- £ vs Rand: 20.4735
16:00: Politics will decide when rates rise
Northedge says the Bank of England won’t want to raise rates while politicians are campaigning:
"The Bank is independent of politics, of course. But it is appearances that count. That election date means the bank will not raise rates in May 2015. Or April, while the parties are on the hustings. And it’s highly unlikely the Bank would even risk March, given that the campaigning will already be hotting up by then. Indeed, any time from January 2015 until polling day would be contentious."
15:53: GBP/CAD resists corrective forces
15:29: Business optimism reached its highest level for 22 years in January
The BDO Optimism Index, which predicts business performance two quarters ahead, reached 103.8 in January, up from 103.4 in December. This is the highest reading ever recorded since readings began 22 years ago and sits well above the 100.0 mark, meaning the UK is expected to outperform its long-term historical growth trend.
In the manufacturing sector, the Optimism sub-index rose to a new all-time high of 117.1 in January, up from 115.5 in December. And for services, which accounts for roughly three quarters of the UK economy, confidence rose to 101.2 in January, up from 100.7 in December.
15:21: Small business confirms robust UK economic growth
The Business Factors Index, produced by independent business funder Bibby Financial Services, tracks the monthly turnover of businesses across five industry sectors - manufacturing, construction, transport, wholesale and business services. Its base point of 100 was established when the Index began in 2007.
Echoing the official GDP figures announced by the Office for National Statistics on January 28, the Business Factors Index indicates record levels of growth across the board and particularly strong performances in manufacturing (up 9.1 points quarter-on-quarter) – helped by a strengthening domestic market – transport and haulage (up 13 points), and more modest growth in business services (up 4.1 points).
14:47: Still favouring GBP over EUR
"We have a longer term sterling positive bias longer term as the BoE will probably tighten policy sooner than the ECB. EUR/GBP is captured in a gradual downtrend channel since mid 2013. Recently, we favored short-term consolidation as some good news is already discounted and as some UK eco data were slightly less buoyant.
"Last week, the EUR/GBP cross rate tested the 0.8350 resistance as the ECB was less soft than expected. For now, the resistance held. We don’t change our LT sterling positive bias yet, but a break above the 0.8350 would be an indication that the correction has some further to go. 0.8405 is the next point of reference on the topside in EUR/GBP."
14:13: GBP/USD traders slow to roll out of bed
13:31: Downside risks incorporated into GBP already?
12:46: Sterling stuck in no-man's land
"For all of this recent bullish activity though the Cable is still stuck in ‘no man’s land’ at the moment as it trades between two major S/R levels: the monthly 200 EMA above price and the broken monthly triangle trend line below price. I would expect the choppiness to continue until a clear break is made out from this zone, either up or down.
"A possible target for any continued bullish movement might be the 61.8% fib level of this same move. This 61.8% fib level is about 1,900 pips away at the 1.82 area and might seem an impossible task but I’d advise you to look at the monthly chart of the E/J and U/J before you reject this. Price might continue to struggle given that the monthly 200 EMA is above and this resistance zone could reject price and cause it to make a prompt move back down. Thus, I’m watching for any reaction here and will trade with the next momentum move, either up or down!"
12:08: Catalyst for further GBP declines
"GBPUSD has well and truly bounced from the 1.6260 support to reclaim a birth at 1.64 and open up for a retest higher - that support level is now even more important for the pair and when we break below it will likely see considerable momentum, which could drag GBPUSD close to 1.6000.
"A potential catalyst for a GBPUSD move lower this week is the Bank of England Quarterly Inflation Report on Wednesday. Many economists expect Governor Mark Carney to change the current forward guidance rhetoric and potentially lower the knockout criteria for a review on policy, since the UK unemployment rate has fallen more sharply than expected."
12:02: Sterling could decline yet further vs the EUR
"Sterling has run up to test resistance in the form of the major long-term downtrend i.e. the one that has been in place for the last seven years, so it is not altogether surprising that it has retreated from this line at the first time of asking. In fact, sterling could fall yet further in the near term, although its weakness is likely to be restricted to a test of the short-term uptrend that currently stands at around 1.193." - Bill McNamara at Charles Stanley.
11:26: Weekly forecast for GBP/USD
"The pair managed to move to the upside and stabilised above 1.6390 which is positive because it favours extending bullishness of the alternative Bat Pattern as showing on graph. Based on technical analysis rules, stabilising above the referred to level represented in 38.2% correction might extend bullishness towards 1.6485.
"Of note, 1.6485 level determines the bullish extension, whereas breaching it might extend the upside move towards 1.6545 while failing to breach will bring the overall downside move again."
11:06: EUR/GBP Unable to crack 0.8340
ICN Financial say:
"The pair found strong resistance at 0.8340 which is the resistance of the main Falling Wedge shown on graph, supported by negativity on Stochastic and downside pressure from the MA 50, forcing the pair to fluctuate around 0.8285 once again.
"In general, stability above the latter keeps chances for the pair to revive positivity over intraday basis, and a breach of 0.8340 will push the pair toward 0.8410 then 0.8560 taking into account that a breakout below 0.8285 will force the pair lower to retest 0.8160 before attempting higher once again."
10:45: Yellen testimony will be important for GBP/USD
Danske Bank analyst Anders Vestergård Fischer says:
"Focus this week turns to new Fed chairman Janet Yellen's semi-annual testimony on monetary policy before the House's financial committee on Tuesday and before the Senate Banking Committee on Thursday. We believe she will signal that the Fed is likely to continue tapering asset purchases but will be flexible and monitor labour market developments very closely."
10:13: Time for the Bank of England to adopt qualitative guidance
The policy of targeting definable figures has been rubbished to some extent, Forward Guidance should now be qualitative say analysts such as Kathy Lien at BK Asset Management:
"We think tying monetary policy to the jobless rate was a big mistake for U.K. and U.S. policymakers and both should abandon this rule completely and move to something more qualitative to manage the market's expectations. This option would create less volatility for their financial markets and the currency than a change in the level of the threshold."
09:55: Tailwinds back to 1.65
Outlook for GBP/USD Neutral, EUR/GBP Bearish
"While resistance holds on closing basis at 0.8349, the cross remains vulnerable as bearish conditions persist. Support is at 0.8266 ahead of 0.8160.
"As a reaction to the recent sharp sell-off which stalled just above main support at 1.6220, there’s scope for upside in the near-term. Resistance is at 1.6411 ahead of 1.6509."