GBP Powers Higher vs EUR but GBP/USD Exchange Rate Stalls: 26/02

Updated: Our Live coverage shows the UK pound to be in a period of consolidation at the start of April 2014. With the March PMI series missing expectations the GBP has found little by way of impetus. However, all eyes are on the release of the Service Sector PMI on Thursday which should set the near-term tone.

Keep in touch with our Live Coverage Here. For the archived material for the day in question please scroll through please scroll down. 

By Rob Samson
GBP USD Volatility

Today's Sterling (GBP) Rates.

  • British Pound vs EUR:
    1.1714
  • British Pound vs USD:
    1.2624
  • British Pound vs AUD:
    1.9383
  • British Pound vs CAD:
    1.71
  • British Pound vs NZD:
    2.1139
  • British Pound vs ZAR:
    23.9082

  • 16:14: Month-end buyers seen pressuring sterling

    Jean-Pierre Dore at Western Union comments on today's GBP/USD weakness:

    "The pound is down slightly against the USD this morning, as month-end USD buyers step in during the NORAM session to square positions, and a large option expiry at 1.6650 underpins the spot market.

    "The only release of note today was a second reading of Q4 GDP, which was in line with expectations at 0.7 percent growth from the previous quarter. Look for GBP to find support at the 1.6650 level against the USD."

    15:52: Correction lower has further to run

    Roboforex see the GBP/USD correction running yet further:

    "Pound continues moving inside descending channel towards level of 1.6580; this movement may be considered as correction. Later, in our opinion, instrument may continue growing up towards level of 1.7000."
    correction in GBP USD exchange rate

    15:16: "The recovery is gaining real momentum" say CBI

    According to the latest CBI Growth Indicator, output volumes in the three months to February grew at their fastest pace since records began.

    The Growth Indicator provides further evidence that economic momentum has carried through at a healthy pace into the beginning of 2014, as consumer and business confidence continues to build, global growth strengthens and monetary policy remains supportive.

    Katja Hall, CBI Chief Policy Director, said:

    "The recovery is gaining real momentum with growth in output volumes at the highest since our records began and growth broad-based across manufacturing, retail and service sectors.

    "The surge in confidence among firms for the next quarter suggests the recovery will continue to gain traction.

    "Looking ahead, strengthening global growth and supportive monetary policy should continue to bolster a broadening and deepening recovery in the UK."

    14:57: Pound euro powers higher

    Strong gains being seen in GBP/EUR, the rate is now 0.3 pct higher at 1.2174. The move coincides with an even heftier slump in the EUR/USD rate. Driving the US dollar higher will be a big Surprise in the form of US New Home Sales which rose +9.6% in January vs -3.8% in Dec. In addition we note the EUR/USD sell-off coinciding with sell-off in the S&P.

    14:54: Momentum on GBP/USD fades

    Camilla Sutton at Scotiabank comments on the waning momentum in GBP/USD following on from today's GDP release:

    "Headline GDP was unchanged from the first estimate at 0.7%q/q but slightly weaker at 2.7% on a y/y basis. The softness in private consumption and government spending was offset by strong business investment and export prints. Markets were content to ignore BoE’s Miles’ warning that there are unlikely to be a sudden surge in rate hikes; but that next year might be the right time to enter a tightening cycle.

    "GBPUSD short‐term technicals: bullish but like EUR as spot is range bound momentum is fading; still technicals warn that GBP is vulnerable to a test higher. We expect a near‐term test up to the recent high of 1.6823."

    13:08: GBP/USD faces large expiries today

    Sean Lee at FXWW gives us some behind-the-scenes info as to why GBP is likely to remain capped today:

    "There are some large expiries later today at both 1.6600 and 1.6650 which should ensure that cable stays capped for the next session or two. Any big moves away from the expiry level will encourage the holder to start selling in the spot market, if they haven’t done so already. Also the fact that the pair hasn’t rallied strongly despite the reportedly big M&A demand, might curb bullish GBP sentiment.

    "That said I’d expect 1.6580 to continue to hold and dips and 1.6750 should be a step too far for the bulls in the short-term."

    12:01: EUR/GBP favoured for a test of the support at 0.8215

    Another EUR/GBP note, this time from MIG Bank:

    "EUR/GBP is grinding lower after Monday's intraday bearish reversal. The breach of the rising channel favours a test of the support at 0.8215. An hourly resistance stands at 0.8267.

    "In the longer term, the technical structure remains negative as long as prices remain below the resistance at 0.8350 (13/01/2014 high).

    "Monitor the support implied by the 61.8% retracement (of the 2012-2013 rise) at 0.8160. Another key support can be found at 0.8082 (01/01/2013 low)."

    11:50: Keep selling EUR/GBP on upticks

    "Regarding, EUR/GBP we continue keeping a close eye on the ECB comments and on the EMU February CPI, scheduled for release on Friday. We maintain a sell-on-upticks approach for EUR/GBP in case of return action towards the 0.8350 resistance." - Piet Lammens @ KBC Markets.

    11:19: Sustainable upmove unlikely

    Concerning the outlook for the GBP/USD, Ipek Ozkardeskaya at Swissquote Bank says:

    "Another resistance stands at 1.6823. Supports can be found at 1.6584 and 1.6426. In the longer term, the technical structure favours a bullish bias as long as the support at 1.6220 (17/12/2013 low) holds. The decisive break of the resistance at 1.6668 opens the way for a move towards the major resistance at 1.7043 (05/08/2009 high). However, a sustainable move above that level is unlikely in the next few weeks."

    10:55: Sterling steady following GDP release

    "The UK published steady GDP growth data this morning, the price action remained limited in GBP-complex. The Cable eased from 1.6702, while EURGBP shortly spiked to 21-dma. In Europe, the EUR traders remain cautious on the upside, offers remain solid pre-1.3773, stops eyed above. The important downside risk on random dovish ECB comments keep the appetite balanced." - Ipek Ozkardeskaya at Swissquote Research.

    09:30: UK GDP data on target, business investment impresses

    UK GDP QOQ (Q4) = 0.7% vs 0.7% expected and 0.7% previous. The ONS also says GDP grew 1.8% in 2013, revised down from 1.9% estimated last month.

    But, of note:

    U.K. 4Q BUSINESS INVESTMENT RISES 2.4%; UP 8.5% ON YEAR

    08:40: Buy above 1.6660

    FutureTechs have this morning issued this buy call on sterling dollar:

    Short Term Trend: Bullish

    Medium Trend: Bullish

    Candlestick Chart says: We bounced from the 38.2% retrace on Monday and haven’t got going to the upside yet but this is our expectation

    Profile Charts says: CHVN is 1.6656. Spent very little time below here yesterday.

    Summary: 1.6606 is holding, albeit not as cleanly as we’d like.

    Trade Idea: Buy above 1.6660, stop at 1.6620, targets 1.6725 and 1.6820. Low Conviction “Keeper”.

    Time: 7.08am
    GBP USD Chart

    08:30: GDP ahead

    A heads up that in one hour's time we get the latest quarterly instalment to the UK GDP series.

    Gross Domestic Product (QoQ) (Q4) is predicted to come in at 0.7%, just below a previous reading of 0.8%. Gross Domestic Product (YoY) (Q4) is predicted at 2.8%, above a previous 1.9%.

    08:28: UBS bullish on the outlook for GBP/USD

    This note just in from UBS:

    "Having unwounded the overextended upside conditions, the pair is regaining strength. There’s potential for more upside to 1.6878. A break above this will open critical resistance at 1.7043. Support is at 1.6584."

    08:19: Speculating on GBP/USD's wild ride

    Further to the observation made in our preceding post, Kathy Lien at BK Asset Management takes a stab at explaining the GBP/USD turbulence:

    "We know that the swings are happening right before the 11am ET / 4pm GMT London fix. A large amount of sterling also needs to be bought to settle the $23.9 billion cash payment that Vodafone shareholders expect to receive on March 4th from their disposal of the company's stake in Verizon but that only explains the immediate recovery and not the sale of the British pound. Some large players could be using the recent strength in the GBP/USD as opportunity to position for a move lower."

    08:00: GBP/USD volatility raises eyebrows

    A hot topic in FX land at present concerns the volatility seen in GBP/USD. The below hourly graph tells a story of range trading and wild swings:
    GBP USD Volatility

    24 hour highlights for the British pound (GBP)

    Here are the key elements of coverage contained in our live reporting of Tuesday's session:
  • Support at 1.21 proves true for GBP/EUR
  • Caution urged on GBP vs USD
  • Lloyds favour medium-term GBP strength
  • Is Vodafone corporate action driving Sterling demand?