GBPUSD Recovery Could Hit 1.56 Say Citi
The pound to dollar exchange rate is well overdue a rally confirms the world's largest currency dealer who say 'real money' is backing the GBP once more.
The British pound has suffered declines against the US dollar with unchecked declines in place since mid-September.
The support level located at 1.51 does however appear to be providing some degree of support. Immediate action since the release of US non-farm payrolls data has been supportive with the USD falling right across the board.
The move higher cements the 1.51 area and now we see moves higher to 1.54 on the cards.
The world's largest forex dealer - Citigroup - has told clients that the rebound in the pound to dollar exchange rate was overdue.
In a currency market briefing to clients Citi say:
"Despite the weaker UK PMI data overnight, our CitiFX global flows and positioning indicators both support a reversal higher in GBPUSD after having undergone notable selling through August but is now starting to see stronger signals for a reversal."
Latest Pound / US Dollar Exchange Rates
  | Live: 1.3344▲ + 0.14%12 Month Best:1.3789 |
*Your Bank's Retail Rate
| 1.2891 - 1.2944 |
**Independent Specialist | 1.3157 - 1.3211 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Citi point out that leverage accounts have been short covering for the past two out of three weeks, and perhaps more importantly, real money has been net buyers of GBP (a first since the August BoE Inflation Report).
"UK data has undoubtedly surprised to the downside recently but historically at this point, the Citi UK Economic Surprise Index shows that market expectations have started to catch up to the softer data and that investors may in fact be starting to become too pessimistic about the UK outlook," says the note.
On a tactical short-term basis Citi are therefore maintaing a "Better Supported on Dips" view, however long-term they see the GBP/USD exchange rate trending lower.
Meanwile, economists at Citi see the next interest rate increase in the United States coming sometime in the spring of 2016, citing concerns about global stock volatility stemming from China slowdown concerns.
Markets are meanwhile roughly positioned 50/50 on a rate increase occuring before the end of 2015.
