British Pound Sterling Live: GBP Forecast vs Euro Upgraded at OCBC; Lloyds Bank Forecasting 60.5 For Services PMI

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The British Pound Sterling (Currency:GBP) is becoming increasingly perceived in a positive light as the UK's economy continues to surprise with the strength and nature of its recovery. For the UK currency Wednesday brings a further data point while Pound Sterling Live digests the latest exchange rate forecast changes amongst analysts in response to recent positive price action.

Highlights:
@ 08:30: OCBC initiate a Sell call on EUR vs GBP
@ 09:34: Services data hits a record, but GBP unmoved
@ 11:54: Is current GBP strength sustainable? 

Changes to Pound exchange rates and latest quotes:

• The Pound to Euro exchange rate is 0.22 pct higher on a daily basis at 1.1840.
• The Pound to US Dollar exchange rate is 0.54 pct higher at 1.5642.
• The Pound to Australian Dollar exchange rate is 0.82 pct lower at 1.7029.
• The Pound to New Zealand Dollar exchange rate is 1 pct lower at 1.9745.
• The Pound to South African Rand rate is 0.58 pct lower at 16.0210.

Please Note: These are wholesale quotes; your bank will levy a discretionary 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 wholesale vs retail currency converter.

17:00: Bank of England MPC and uncertainty about guidance loom

Tomorrow at 12:00 we get the next big test for the British Pound.

The Bank of England MPC announce the decision of their latest monetary policy meeting.

Don't expect any changes.

The wildcard however is the possibility of forward guidance.

Will the MPC try and talk interest rate expectations lower? If so this would be a negative for the Pound Sterling.

Unfortunately the exact nature of any guidance is a complete unknown; and anything that raises eyebrows will shock Sterling higher or lower.

14:36 A warning for GBP/AUD watchers

Stephen Gallo at BMO Capital markets warns that the Australian dollar could run yet higher:

"The AUD/USD has been at the fore through Asia and London, with demand from a cross section of names. Still feels very much that the market does not own enough AUD across the board and I think this squeeze higher still has further to run, ahead of the weekend election.

"We remain buyers of AUD on any dip towards 0.9110-20."

12:24: PMI data confirms a 'mini-boom' and MPC will struggle to justify being this accommodative

Boris Schlossberg at BK Asset Management on the latest developments regarding the British Pound:

"The data confirmed (see @ 09:34) that the UK economy is now in the midst of a full on mini boom and although unemployment remains high, growth is likely to improve markedly in the second half of this year. Cable ran through the 1.5600 barrier but the rally stalled just above that level as traders remain wary of BOE's dovish stance.

"Still with eco numbers continually beating their mark it will become increasingly difficult for Mr. Carney and the MPC to remain unequivocally accomodative for much longer."

11:54: Questioning the sustainability in current strength of the Pound

Ipek Ozkardeskaya questions the current strength we are seeing in the British Pound:

"We see less optimism on GBP speculative positions. The net open interest is still negative while large GBPUSD put options have been contracted with strike 1.5300 and monthly expiries from November 2013 to June 2014.

"The future bearish bets raise the question on the sustainability of the current strength in pound. In the short-run however, GBPUSD continues to test the upside and the GBP-bulls are clearly in charge ahead of the BoE meeting due tomorrow."

10:44: Why has there been little impact to GBP?

We noted that the impact on the British Pound of today's Services PMI beat has been somewhat limited.

The team at FX Market Alerts explain:

"As we anticipated, the above consensus UK services PMI has had limited impact on GBP as yet, though buying ahead of the numbers will largely have been the key factor behind this.

"This is why we were looking for a higher number than this in order to see some fresh buying interest in the cross rate especially, and after testing down to within a tick or so of yesterday's lows, we are currently stuck around .8445-50.

"The risk is that we get a 'drift' to .8470-75, but Cable is still looking to take on the offers at 1.5600, and if a successful push higher is achieved, the cross rate should follow - to some (modest) degree."

09:34: UK Services Sector Hits a Record

UK service sector PMI surprises on the upside yet again, rising to 60.5 fom 60.2 in July, beating expectations of 59.7.

Forex.com say: "Wow: UK service sector PMI is at its highest ever level since the series began in 1998... this recovery looks like it is real."

The Pound Sterling is largely unchanged reflecting that markets were actually anticipating a beat and that further GBP gains from here are likely going to be hard to come by.

08:30: OCBC Initiate a Sell on Euro vs Pound Sterling Exchange Rate

The Euro is a Sell against the British Pound at OCBC Bank.

OCBC's Emmanuel Ng tell us he is forecasting the Euro to Pound exchange rate at 0.8330:

"Elsewhere we also instituted a tactical sell EUR-GBP (spot ref: 0.8489) targeting 0.8330 with a stop at 0.8570. With the pound underpinned by a supportive data stream, if the BOE’s Carney is less than strident in talking down rates on Thursday, the cross may have room to test lower if the ECB remains sufficiently dovish on rate prospects."

08:15: Pound Sterling Forecasted at 1.5800

Citi have today told us that they see further gains for the Pound Sterling vs US Dollar exchange rate.

In a note to clients Citi say:

"GBP/USD will likely climb to 1.5750-1.5800 (12.22-12.26): GBP gained as U.K. Construction PMI rose from 57.0 to 59.1 in Aug, topped expectation.

"GBP Outlook: BOE may not expand its QE program, which could improve GBP’s sentiment. Technically, GBP/USD will likely climb to 1.5750-1.5800, with support at 1.5430.

"The Bank of England may not expand its QE program following the recent upbeat economic data. This may support the pound in the near term."

08:12: The UK Upswing is Forecasted to Continue

At 09:30 the British Pound Sterling (Currency:GBP) faces its next big test.

Lloyds Bank Research ahead of today's all-important Services PMI release from Markit:

"Following the stronger-than-expected UK manufacturing and construction PMI prints earlier this week, today’s services PMI release for August should provide further evidence that the UK upswing continues to strengthen.

"The headline index has posted a rapid recovery since the spring and July saw it climb to 60.2 - its highest level since December 2006.

"Our UK team anticipate a further increase today to 60.5. This would be consistent with another solid outturn for Q3 service sector output of around 0.6% q/q."

Analysts are forecasting a reading of 59, down from 60.2.