GBP Forecasted to Extend Gains vs US Dollar and Euro, Construction PMI Tipped to Decline: Live Coverage on Tue 3rd of August
The British Pound Sterling (Currency:GBP) faces another eco-stat test at 09:30 - is it finally time for a negative data surprise? Either way, the UK currency continues to trade in robust fashion with technical indicators forecasting further gains ahead.
Latest day-on-day currency levels
- The Pound to Euro exchange rate is 0.26 pct higher on a daily basis at 1.1814.
- The Pound to US Dollar exchange rate is 0.08 pct higher at 1.5557.
- The Pound to Australian Dollar exchange rate is 0.64 pct lower at 1.7209.
- The Pound to New Zealand Dollar exchange rate is 0.05 pct higher at 1.9918.
- The Pound to South African Rand rate is 0.4 pct higher at 16.0794.
Be Aware: The above are spot market quotes, your bank will subtract their own spread when passing their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please learn more here, or use our custom live vs retail currency converter.
Highlights:
@09:40: Positive reaction to Construction PMI data
@11:45: Construction sector delivering the jobs
@14:38: Latest predictions for GBP-EUR
16:30: Tomorrow we get Service Sector PMI
The next big data release of the month for the UK currency looms.
At 09:28 Markit release their August Services PMI figure.
Analysts are forecasting a reading of 59, down from 60.2.
Bear in mind that both Construction and manufacturing have both stumped expectations. Will it be a case of more of the same?
However, as Piet Lammens at KBC Markets notes (See @ 14:38) it will become increasingly difficult for data to push GBP higher unless it beats by a wide margin.
14:38: Have we notched up the best part of GBP/EUR gains?
Piet Lammens at KBC Markets warns that further Sterling gains against the Euro could be harder to come by:
"EUR/GBP has incorporated the recent improvement in the UK eco data. Even so, we think that the downside in sterling has become well-protected. The pair is drifting further south in a broad sideways consolidation pattern between 0.8800 and 0.8400. The easiest part of the sterling gains against the euro might be over. The sterling rebound might shift into a lower gear.
For further near and short term predictions on the GBP-EUR please see our latest article.
13:00: Markets already wary of a UK housing bubble?
Ipek Ozkardeskaya at Swissquote on GBP and the interpretation of today's UK construction data in the context of a housing bubble:
"GBPUSD spiked to 1.5603, last week highs, and is likely to challenge the topside on strengthening sentiment. The cable is still in the corrective zone, yet buying interest remains tight at 1.5480/1.5500.
"The long-legged Doji formation on Monday reinforces the expectations of a shift into a broader bullish trend. On the other hand, it is worth keeping in mind that the markets clearly doubt about these numbers being artificially bloated by the speculations and the speculative bubble in the UK housing market."
11:45: Construction sector delivering jobs growth
Today is all about construction and the boost the latest PMI data has provided the British Pound.
We now hear from employment agency Reed who points out the jobs growth the sector is delivering. Remember, employment is the number one knock-out clause for interest rate forward guidance at the Bank of England:
The findings from the latest Reed Job Index, which is compiled using data from around 150,000 vacancies advertised on reed.co.uk, showed that the jobs market held steady in August 2013 and is up 16% year-on-year.
The construction & property sector is leading this growth, with a rise in job opportunities of 67% year-on-year and 3% month-on-month.
James Reed, chairman of reed.co.uk, says:
“The jobs market has certainly been buoyant this summer. The construction and property sector continues to lead the charge for the second consecutive month and this is no great surprise given the current level of support for buyers. But will this be just another bubble that bursts?”
09:42: UK Construction sees 'steep and accelerated expansions'
When delivering today's consensus-busting data, Markit point to an increasingly bullish UK construction sector:
"August data indicated another strong improvement in the overall performance of the UK construction sector, as highlighted by steep and accelerated expansions of both output and new business volumes. Construction companies also remain confident about the year-ahead outlook for business activity at their units, with around 46% of survey respondents expecting a rise and only 10% a reduction."
09:40: GBP in solid reaction to Construction PMI
There is just no holding the positive data surprises back.
The Pound Sterling has reacted favourably to news that UK PMI Construction increased to 59.1 points in August, from 57 points in July, according to data released today by Markit. Analysts expected a drop to 56.8 points.
09:06: UniCredit suggest selling into rallies
UniCredit say:
"Cable failed to hold gains towards 1.56 despite the strong UK PMI survey, confirming that selling it into rally remains recommended. We still favour buying EUR-GBP below 0.85 on a medium-term horizon, too."
09:04: Latest Pound/Dollar forecasts
A roundup of the short-term forecasts for GBP-USD on Tuesday morning. Read the morning roundup here.
08:37: Euro forecasted lower vs Pound Sterling
Turning to the latest short-term forecasts for the Euro to Pound Sterling rate, Geoffrey Yu at UBS says:
"The cross is under selling pressure and all evidence suggests more weakness to test the important support at 0.8398. Resistance is at 0.8553."
08:23: Forecasting Pound vs US Dollar at 1.56
Emmanuel Ng at OCBC Bank says he is forecasting further gains from here in the Pound to US Dollar exchange rate:
"GBP-USD received another boost following the better than expected Aug manufacturing PMI and the pair may remain supported on a
heavy EUR-GBP ahead of the BOE/ECB meetings this Thursday. If cable is able to continuously hold above the 200-day MA (1.5502), it may well attempt to creep towards 1.5600 in the near term barring a positive USD disturbance this week."
08:15: Markets keeping one eye on the Bank of England MPC decision due on Thursday
The Bank of England is unlikely to announce any policy changes; but the risk for the British Pound is that dovish guidance is released.
Paul Robson at RBS says regardless of the outcome the Pound Sterling seems robust:
"The focus this week will be Thursday’s BoE rate decision. With a change in policy settings highly unlikely this month, the market's focus will be on whether there is an accompanying policy statement.
"On balance we expect a statement. However, with the MPC having chosen not to issue a statement in August having broken from tradition in July, this call is much more uncertain than usual. Whether one materialises or not, it is hard to envisage a dovish market reaction."
08:12: Lloyds forecasting a fall in today's PMI data
The immediate concern for the British Pound Sterling materialises at 09:30.
Lloyds Bank Research say:
"Yesterday’s strong rise in the UK manufacturing PMI provided further signs of that the economic recovery in the UK is gathering steam. Ahead of tomorrow’s key reading from the sevice sector, the spotlight today falls on the construction PMI.
"The headline index posted a sharp 6pt rise in July, to reach its highest level since June 2010. This largely reflected increased activity in the private housing sub-sector driven by government measures to boost housing demand.
"At current levels the PMI may be overstating the current state of the sector. Expectations are for a small fall to 56.9 from 57.0. However, this would still be consistent with further output growth in the third quarter."