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British Pound (GBP) LIVE: Latest Sterling Forecasts, Views and Commentary at the Start of a Critical Week

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.

For the latest, see our live coverage section. For the archived material you clicked for, please scroll down. 

By Gary Howes
British pound forecasts and coverage

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    16:27: The real action kicks off tomorrow

    Barclays tell us what to look out for in GBP's week ahead:

    "It is a busy week ahead for the GBP with Inflation (Tue), employment (Wed), and retail sales (Fri) all out. Their outcome will be important for the prospect of the GBP given that the MPC emphasizes in its latest Quarterly Inflation Report (QIR) that it will look at a wider set of indicators rather than the single unemployment rate threshold.

    "For this month, we expect the unemployment rate to stay unchanged at 7.1% (consensus: 7.1%), solid jobless claims of -24.0k (consensus: -20.0k), and higher average weekly earnings of 1.1 %3m/y (consensus: 1.0%). As for inflation and retail sales, we look for CPI of 2.0% y/y (consensus: 2.0%) and retail sales-ex auto of -1.0% m/m (consensus: -1.2%). Overall we expect the data to be GBP supportive. The February MPC meeting minutes are also due on Wednesday, though it may be of lower relevance in light of last week’s QIR."

    15:57: Buy the dips

    More from BK Asset Management's Lien:

    "Most of the U.K. economic reports that are scheduled for release should surprise to the upside. Tomorrow's inflation report may be softer but employment and retail sales should have improved in the month of January. The momentum in the British pound was triggered by the latest BoE Inflation Report, in which the central bank abandoned its unemployment rate threshold and significantly upgraded its 2014 GDP forecasts.

    "As the year has just begun, they probably wouldn't have made these changes so quickly if the economy weren't gaining momentum. Therefore not only do we expect a tinge of hawkishness from the BoE minutes, but we are also looking for some healthy economic reports. The momentum in sterling is to the upside and we have every reason to believe that this trend will continue. There is no major resistance in the GBP/USD until 1.70. The currency pair could drop to 1.6650 on the back of weaker CPI but we will view this move as an opportunity to buy at lower levels."

    15:37: British pound runs into a wall of profit taking

    Kathy Lien at BK Asset Management has commented on today's reversal in GBP:

    "The only notable move that we had in the foreign exchange market over the past 24 hours is in the British pound, which climbed to a fresh 4 year high against the U.S. dollar at the start of the Asian trading session.

    "While there may be plenty of fundamental reasons for us to believe that sterling will strengthen this week, we can't ignore the intraday reversals in EUR/USD and GBP/USD. Both currency pairs extended their gains during the Asian trading session but the rallies fizzled in Europe.

    The reversals were not caused by economic data and the 1% rise in the FTSE should have driven GBP/USD higher but the currency pair ran into a wall of profit taking above 1.68 and now appears vulnerable for a move back down to 1.66.

    15:23: Selling EUR/GBP is a trade we like say Barclays

    "We expect EUR/GBP to grind lower, driven mainly by relative monetary policy outlook between the ECB and BoE, and maintain our one-year forecast of 0.77. Technical analysis also suggests medium-term downside in EUR/GBP and the local UK data this week are expected to be GBP-supportive overall," say Barclays Capital in their latest edition 'FX thoughts for the week ahead.'

    14:59: Freelancers want more clarity from Salmond

    More on the Scottish independence debate which has certainly kicked into top gear.

    PCG, the membership organisation for freelancers, contractors and independent professionals, has today (17/02/14) responded to the speech by the First Minster of Scotland, Alex Salmond by calling for a clear economic plan from the Scottish Government.

    Simon McVicker, Director of Policy and Public Affairs at PCG, said:

    “It is crucial that the Scottish Government clarifies what an independent Scotland – with or without the pound - would mean for businesses.

    “It isn’t enough to rubbish the claims of those on the other side of the debate. They called for this referendum and should therefore have a clear plan for independence in place that puts the minds of Scottish independent professionals at rest.

    “There are over 150,000 freelancers and almost 300,000 self-employed people operating in Scotland who need to know the consequences of independence. A clear plan from the Scottish Government will allow them to make a well-informed decision in September that is best for them, best for Scotland and best for Britain.”

    14:37: No to Sterling Union say CBI

    The CBI today responded to a speech by Scotland’s First Minister, Alex Salmond, on a currency union for an independent Scotland. John Cridland, CBI Director-General, said:

    “Scotland needs a stable currency, within a secure single market, so that Scottish companies have the best chance to grow and create jobs. Staying in an unstable currency union would have serious economic consequences.

    “With the three main UK political parties making it clear that keeping the pound after independence is not an option, it is maintaining the Union that offers the stability of Sterling that businesses need.”

    14:26: Will the weather stymie the sterling bulls?

    For GBP, an exceptionally wet January and February pose near term risks to the economic recovery say Deutsche Bank. This week provides us with two important forward looking February surveys (house-prices and CBI industrial trends), as well as key hard data for January (CPI, employment and retail sales). "Weak out-turns could leave GBP/USD and EUR/GBP vulnerable to retracement," says an FX note issued by the bank today.

    14:21: Capital inflows needed to support the British pound

    Driving the British pound at present is the pricing in of an interest rate hike at the Bank of England in mid-2015.

    According to Deutsche Bank whether interest rate expectations continue to move sterling higher will depend on the tenor of economic data.

    Economic indicators remained near their highs and sterling has historically been more correlated to the change rather than level of data.

    Instead, Deutsche Bank argue, capital inflows would be needed for renewed sterling strength, a pick-up in inbound FDI one potential source.

    "For this reason the pound is best bought against currencies with weak flow dynamics such as the Canadian dollar, but chasing moves higher against those with countervailing strong flows, such as the dollar and euro, could be a mistake," say Deutsche Bank.

    14:11: Will Friday's retail data surprise to the upside?

    Ahead of Friday's retail sales data we have good news in from the British Retail Consortium.

    Footfall in January was 1.6% higher than a year ago, up on the 2.4% fall in December, this is the best footfall performance since December 2011, reflecting the positive figures of the BRC-KPMG Retail Sales Monitor. High streets reported the only fall, down 0.6%, substantially up from their 3.7% fall in December.

    Helen Dickinson, British Retail Consortium Director General, said:

    "More shoppers were out and about in January, with a solid 1.6 per cent in overall footfall across the country. It's good news for retailers and it helps to explain the rise in sales we reported earlier in the month, demonstrating that UK shoppers were enthusiastically checking out the promotions available during the sales season.

    12:42: Staying neutral on euro/sterling

    ICN Financial on the key levels facing EUR/GBP at present:

    "The pair kick-started trading this week with more negativity, currently testing the critical short term support areas at 0.8160. A breakout below this level will push the pair further to the downside toward 0.8000 psychological barrier. For now, our weekly outlook is neutral to observe the pair at the critical 0.8160 support and 0.8195 resistance. Breaching the resistance will activate the previously favoured positive scenario with extended upside targets at 0.8560."

    11:51: Pound sterling appreciates by over 8% under Carney

    Farhan Ahmad, trader at Tradenext, comments on BoE Governor Carney's appearance on television over the weekend and the impact he has had on GBP:

    "The Governor of the Bank of England was interviewed on the Andrew Marr show yesterday and gave the general public some clarity on the future of any increase to borrowing costs. Carney has made more of an effort that his predecessor to give investors a picture of what exactly he means by “forward guidance”, and to make sure any fears are eased by well-timed interviews and press releases.

    "Yesterday’s interview on the popular Sunday morning politics show was a direct attempt at addressing the general public, and to illustrate what the markets have known for a while: interest rates will not go up any time soon, and when they do, it will be a gradual rise.

    "A recent report from Bloomberg shows that since Carney has taken over as Governor, the sterling has appreciated in value against a basket of 9 developed market currencies, by over 8%. Despite Carney insisting rate rises are subject to marked improvements in the labour market, many in the City and Wall Street believe the UK will be the first in the developed world to raise rates."

    11:28: Beware downside correction

    Commenting on the outlook for GBP/USD, Ipek Ozkardeskaya at Swissquote Bank says: "Technically, trend and momentum indicators applying to GBPUSD chart are solidly positive. Option bids are seen at 1.6700/55/75 and 1.6800. The key technical resistance is placed at 1.7043 (August 2009 high). The RSI approached the overbought zone (today at 68%) suggesting some downside correction should soon come into play, watch for interesting dip buying opportunities."

    Regarding EUR/GBP the analyst says: "EURGBP took out the year-low of 0.81722 and hit the fresh low of 0.81577 early today. As the bearish momentum gains strength, our closest target is placed at 0.81350/400 (down trending channel floor) then 0.808500 (January 2003 low)."

    11:11: key level will now be 1.6571

    Craig Erlam at Alpari UK on the forecast for the pound dollar rate:

    "The last week was very positive for sterling, rallying 350 pips against the US dollar and forming an almost perfect marabuzo candle on the weekly chart. A gap higher over the weekend added to this bullish tone but that gap has been quickly closed and we’re now seeing it pare some of last week’s gains. It’s not unusual to see a correction in the pair after such a strong week, so I wouldn’t be surprised to see some weakness in the next couple of days.

    "The key level will now be 1.6571, the marabuzo line of last week’s candle. A failure to close below here would essentially confirm that we’re seeing a correction and would likely prompt another push higher. Overall, the pair is looking quite bullish and having made a new 51-month high, the next target will be 1.6876 followed by 1.70." pound dollar exchange rate forecast

    10:40: KBC adopt a cautious tone towards sterling this week

    Piet Lammens at KBC Markets echo our stance that an overly aggressive position on sterling this week may not be wise:

    "This week’s UK eco data might decide whether the time is already ripe for a next up-leg of sterling. Even as we have a sterling positive bias longer term, we stay a bit cautious short-term as the UK data might be slightly less strong than in the recent past. We keep a sell-on up-ticks bias."

    10:33: Larger EUR/GBP selloff on the cards say UBS

    "Further selling this morning has seen the cross trade below critical support at 0.8160. A close below which would be next bearish event, triggering a sell-off to 0.8082. Resistance is at 0.8227," say UBS in reference to the euro sterling exchange rate.

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    10:24: Speculators increasingly bullish on GBP

    The latest data available from the CFTC shows forex market speculative positions favour further gains in the GBP. Speculators have increased their exposure to sterling with positioning is more net long than during much of the past year. "GBP positioning looks to have increased significantly over the week since Tuesday, up $1.6bn to $2.7bn, which would be the most net long since January 2013," say Nomura.

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    10:17: Sterling sees early gains reversed

    The pound exchange rate complex is under pressure in mid-morning with traders taking exposure to the GBP off the table. As mentioned already here we have a busy week ahead so aggressive buying will most likely not happen. This is a healthy scenario as it would not be bode well to run into Wednesday's event risk extended to the topside.

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    09:56: GBP/USD rally stalls at double top

    Upward momentum in the pound dollar exchange rate appears to have stalled with a significant technical indicator flashing on the charts.

    A note from Forex Tell says:

    "Cable has stalled at the old high on the 24-01-14 at 1.66670 leaving a double top in play. If the market is unable to break above the double top in the coming session a test of the 38.2 fib at 1.65100 is likely. A break above the 1.66670 high will confirm the current wave 7 with a target of 1.68750 where wave 7 will equal wave 1.

    "Smart money has continued to buy Cable on 1:1 dips in recent sessions, with the 1:1 (Purple) outlined yesterday attracting plenty of buyers looking to target stops above the 1.66670 high."

    09:39: Beware volatility on Wednesday

    We would expect trade in the British pound to settle ahead of Wednesday when things will get interesting.

    Joshua Mahony at Alpari UK says:

    "On Wednesday, we are expecting the most volatility, where the release of the jobs data will highlight whether the improvements seen over the past four months are set to continue apace. The unemployment rate, currently standing at 7.1% is the lowest seen since early 2009 at which point the rate was rapidly on the rise.

    "Thus the fact that the UK unemployment is so rapidly falling is a testament to the positive transition the economy is currently within. Mark Carney’s previous stipulation that upon reaching 7.0%, the BoE would consider raising interest rates appears to now be out the window, after issuing ‘forward guidance 2.0′.

    "Thus whilst the reduction of this measure may be somewhat less critically linked with monetary policy, there is certainly going to be some aspect of interconnectedness between the health of the jobs market and monetary policy going forward."

    08:34: Can GBP/USD finally break into the 1.70's?

    The British pound vs US dollar exchange rate has not seen such levels since May 2011. We are now at the top of a yearly sideways channel. A sustained break of current levels could see the declines triggered during the financial crisis of 2008 finally reversed.

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    08:30: Pound to euro forecasted to hit 1.23

    The British pound is headed towards 1.23 at present having broken resistance at 1.22. The move proves the big exchange rate forecasters we follow to be on target with their 3 month call. These are year highs for GBP/EUR.

    08:15: Rightmove show house prices steaming ahead

    Property website Rightmove said February's asking prices are now at an average of £251,964 across England and Wales.

    It said this is 6.9% higher than a year ago, amid ongoing demand from would-be buyers.

    The rise is the highest since November, 2007.

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    This week for Sterling

    This week will see the "release of yet another strong labour market report and potentially subdued retail sales. On balance, we think sterling will trade with some upside bias," say UniCredit Bank.

    Tuesday: Inflation data is due. This will be an important reading from the perspective that the Bank of England is resisting a rate increase partially on the observation that inflation has fallen below the 2% threshold. Consumer Price Index (YoY) (Jan) is predicted to come in at 2%.

    Wednesday: Bank of England Minutes. What was the Monetary Policy Committee thinking at this month's meeting, and what are their opinions on raising interest rates. All will be revealed at 09:30. ALSO at 09:30 we get labour market data. The ILO Unemployment Rate (3M) (Dec) is predicted to read at 7.1%. A smidgen above the 7% targeted by the MPC. More focus will now fall on the rate of pay; Average Earnings including Bonus (3Mo/Yr) (Dec). This is an indicator of how slack in the economy is being absorbed. This is something the Bank wants to see happening ahead of a rate rise. Any increases here will propel sterling higher.

    Friday: Retail sales. This series has disappointed thus far in 2014. Retail Sales (YoY) (Jan) are expected at 5%, down on last month's 5.3%.

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    What happened on Friday

  • The best performing currencies were the British pound (GBP), Australian and New Zealand dollars. GBP/USD hits a new 'nearly; 3-year high
  • "My trade-of-choice is to be long GBP"
  • The end of a profitable week for GBP-complex
  • Follow Friday's events as they happened.

    Expect this to aid the EUR/GBP to some degree.

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