GBPUSD news - page 22
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BOE fixes payment system problems
A technical problem shut down a key Bank of England payments system, halting transfers of sterling among banks for several hours on Monday.
The bank's Real-Time Gross Settlement system went off line following what the central bank described as "routine maintenance," but was working again by afternoon. The central bank said the system would clear transactions until 8 p.m. GMT, later than normal, to handle any backlog.
The RTGS system settles transactions conducted via many of the main sterling interbank payments channels, including the Clearing House Automated Payment System, or CHAPS, a key system for electronic transfers of large sums of money.
The hitch in the RTGS transactions system underscored the challenges that banks and central banks face as they look to process huge volumes of transactions over computer software that needs to be regularly updated.
On its website, the Bank of England says that the smooth functioning of the RTGS system is vital. The software operates "on fault-tolerant computer hardware which is replicated on a second site; and with the business operation also conducted on a split site basis," the site says.
CHAPS uses the RTGS system to handle transfers of money for purposes such as interbank loans and house purchases. On average, CHAPS handles GBP277 billion ($445.6 billion) in transactions a day, according to the company that runs it.
The U.K.'s securities settlement system, CREST, which is run by Euroclear U.K. & Ireland, also uses RTGS to process transactions. The CREST system wasn't affected, according to BOE officials.
The BOE uses its system to settle transactions in real time, rather than at the end of the day. This allows for greater financial stability and permits banks to credit and debit accounts knowing that the original instruction can't be canceled or revoked.
House buyers were braced for delays. Mark Hayward, managing director at the U.K.'s National Association of Estate Agents, said in a statement before the system was repaired that the problems "will have a cascading effect and it is likely any payments will now be held up for a day or more as money takes time to transfer."
The fault comes as regulators, including the Bank of England, worry over the resilience of computer infrastructure in the U.K. banking sector.
Bank of England officials are also concerned that lenders could be hit by a crash in house prices that might leave them burdened with bad loans.The bank is closely studying the British housing market for signs of overheating. Earlier Monday, the U.K. Council of Mortgage Lenders said that a measure of the gross amount of mortgage lending in the country plateaued in September but still remained 10% higher than a year earlier.
In October, the central bank asked the U.K. government for powerful tools to curb real-estate lending--including the right to set a limit on the amount of loans extended to borrowers with high debts in relation to their income.
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U.K. Budget Deficit Widens In September
The U.K. budget deficit increased in September from last year, data published by the Office for National Statistics showed Tuesday.
Public sector net borrowing excluding interventions totaled GBP 11.8 billion in September, an increase of GBP 1.6 billion from the same period of last year.
This increase in net borrowing is predominantly a result of an increase of GBP 1.6 billion in central government net borrowing, the ONS said.
Public sector net debt excluding financial interventions was GBP 1,451.3 billion in September, GBP 100.7 billion or 7.5 percent higher than at the end of September 2013.
For the financial year-to-date 2014/15, PSNB excluding banking groups came in at GBP 58 billion, an increase of GBP 5.4 billion from the prior year.
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U.K. Pound Little Changed as Investors Await BOE Meeting Minutes
The pound was little changed before minutes of the Bank of England’s most recent policy meeting that will add to evidence of officials’ thinking on the timing of their first interest-rate increase since 2007.
Analysts from Bank of America Corp. to Societe Generale SA have changed their forecasts for when the BOE’s Monetary Policy Committee will raise borrowing costs from a record-low 0.25 percent after data last week showed inflation dropped to the slowest in five years in September. Forward contracts based on the sterling overnight interbank average, or Sonia, showed investors have pushed back bets on a 25 basis-point increase in borrowing costs to September, from February just two months ago.
“We’ll be looking in the minutes to see if the MPC has shifted their view towards a dovish outlook for policy,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The minutes may highlight some more concern over downside risks to growth given the weaker external demand outlook. Inflation as well has obviously disappointed.”
Sterling was at $1.6124 as of 7:10 a.m. London time after falling to $1.5875 on Oct. 15, the lowest since November. The U.K. currency was at 78.94 pence per euro after appreciating to 78.78 pence yesterday, the strongest level since Oct. 13.
The pound has climbed 7.3 percent over the past year, the second-best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as investors bet the BOE was moving closer to raising interest rates.
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BOE Splits on Rate as Majority Sees Mounting Euro-Area Risk
Bank of England officials split for a third month on whether to increase the key interest rate as a majority saw increased risks from a slump in the euro-area economy.
Minutes of the Monetary Policy Committee’s Oct. 7-8 meeting published today showed Martin Weale and Ian McCafferty wanted to increase the key interest rate by 25 basis points, with the remaining seven members voting to keep it at a record-low 0.5 percent, where it’s been since March 2009.
Officials said pessimism about the global economy had increased and there was “mounting evidence of a loss of momentum in the euro area.” For the MPC majority, including Governor Mark Carney, that had “increased the risks to the durability of the U.K. expansion in the medium term.” In contrast, Weale and McCafferty said the economy had so far “not been affected by damaging financial contagion” from its biggest trading partner.
The minutes point to a hardening of the positions within the panel, with the majority becoming more concerned about the impact of the weak European economy on Britain’s recovery. BOE Chief Economist Andy Haldane said last week that the international growth outlook and a lack of domestic inflation have left him “gloomier,” underscoring the case for officials to take time before raising borrowing costs.
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BoE Split 7-2 Again On Rate; Unanimous On QE
Bank of England policymakers decided to leave its key rate at a historic low of 0.50 percent in a split vote for the third straight time at the meeting held early this month as a majority of members noticed increased risks from slowing global economy, especially in euro area.
Ian McCafferty and Martin Weale sought a quarter point hike in the bank rate, to 0.75 percent, while other seven members including Governor Mark Carney voted to keep the rate unchanged at 0.50 percent, the minutes of the Monetary Policy Committee meeting showed Wednesday.
The voting pattern of the meeting, held on October 7-8, was similar to the previous two meetings.
Regarding the stock of purchased assets, the MPC unanimously voted to leave the the programme unchanged at GBP 375 billion.
For McCafferty and Weale, economic circumstances were sufficient to justify an immediate rise in Bank Rate.
In the judgment of these members, even after a rise of 25 basis points, monetary policy would remain extremely supportive, and an early rise would facilitate the committee's aspiration that any subsequent rises in Bank Rate should be only gradual.
But for most members, there remained insufficient evidence of prospective inflationary pressure to justify an immediate increase in the interest rate. McCafferty and Weale said keeping the rate at record low for too long risked unbalancing the recovery.
Majority of members said the U.K. economy had been growing sufficiently quickly to absorb some of the slack in the economy, while there were some signs that the pace of growth was beginning to ease.
The housing market appeared to be cooling with house price growth slowing to a more sustainable pace. Moreover, further downside news in the euro area increased the risks to the durability of the U.K. expansion.
The British economy grew 0.9 percent in the second quarter. The International Monetary Fund forecasts the U.K. economy to grow 3.2 percent this year and 2.7 percent in 2015.
The EY ITEM Club forecast economic growth to ease to 2.4 percent next year from an estimated 3.1 percent in 2014. The think tank said Monday political uncertainty at home and abroad now tops the worry list and is set to dampen business investment.
IHS Global Insight's Chief UK Economist Howard Archer said he does not think that the BoE will delay raising interest rates past mid-2015 as UK growth is set to hold up relatively well over the coming months, barring a major global downturn.
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UK retail sales fall 0.3% – GBP/USD slips below 1.60
A disappointment from the UK: the volume of retail sales fell 0.3%, contrary to expectations for a smaller slide. In addition, the BBA mortgage approvals number fell below 40K.
GBP/USD is losing 1.60 but not going very far.
The volume of retail sales was expected to slide by 0.1% in the UK in September after a rise of 0.4% in August (before revisions).
GBP/USD traded around 1.6030 towards the publication, staying in the low range.
Yesterday, the pound was hit hard by some concerns expressed by the members of the Monetary Policy Committee. Carney and co. are worried about the euro-zone and its impact on the UK.
Pound Falls a Third Day as Retail Sales Add to Concern
The pound fell a third day versus the dollar, the longest losing streak in almost three weeks, after a report showing retail sales slid more in September than analysts forecast added to concern the economy is faltering.
Sterling weakened versus most of its 16 major peers as the Office for National Statistics said the volume of Britain’s sales including auto fuel decreased 0.3 percent from August. Analysts predicted a 0.1 percent reduction, according to the median estimate in a Bloomberg News survey. U.K. government bonds dropped a third day as Bank of England policy maker Ben Broadbent said the central bank will increase interest rates when economic “headwinds” fade.
“A lot of the fears about the economy are now materializing and the bottom line is the downside for sterling is still there,” said Neil Mellor, a currency strategist at Bank of New York Mellon in London. “Sterling was being bid up right to $1.70, largely because the Bank of England was the only central bank, the Federal Reserve aside, that appeared likely to start raising interest rates.”
The pound slid 0.2 percent to $1.6021 at 4:22 p.m. London time. The three-day decline is the longest run since Oct. 3. Sterling weakened 0.1 percent to 78.92 pence per euro, halting a five-day advance.
The U.K. currency has fallen 0.5 percent over the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies, as investors cut bets the BOE is moving closer to raising interest rates from a record-low 0.5 percent.
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UK GDP +0.7% as expected – GBP/USD ticks up
No surprises from the UK: the economy grew at a pace of 0.7% q/q in Q3 according to the first read. Year on year, the economy grew 3%, also as expected.
GBP/USD is moving up a bit, as a sort of “relief rally”.
More: construction numbers look somewhat underwhelming and the index of services is also not that amazing. However, both the quarterly and yearly numbers are good.
The United Kingdom was expected to report a growth rate of 0.7% quarter over quarter in the initial read for Q3, or 3% year over year. The final read for Q2 was a growth rate of 0.9%.
GBP/USD traded around 1.6030 towards the publication.
Britain has enjoyed strong growth for over a year but recent signs are somewhat worrying: retail sales figures disappointed and some PMIs are off the top. More importantly, wages and inflation are subdued.
Expectations for a rate hike have been pushed back from the spring of 2015 towards the summer.
Support awaits at 1.60, followed by 1.5910 and 1.5850. Resistance awaits at 1.6075 and 1.6150.
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GBP/USD forecast for the week of October 27, 2014
The GBP/USD pair went back and forth during the course of the week, eventually forming a very neutral candle. The neutral candle suggests that the buyers are starting to make a little bit of noise here, and that we could very well see the market go higher. The previous hammer of course was very supportive, so we feel the market should eventually break out to the upside, but we need to clear the 1.62 level on a daily close in order to start buying at this point in time.
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U.K. CBI realized sales hold steady in October
U.K. retail sale volumes in October was unchanged from a month earlier, underlining optimism over the health of the country’s economy, industry data showed on Monday.
In a report, the Confederation of British Industry said the result of its index of U.K. retailers held steady at 31.0 this month. Analysts had expected the index to fall by 6.0 points to 25.0 in October.
On the index, a reading above 0.0 indicates higher sales volume, below indicates lower.
Grocers and the clothing sector in particular saw an acceleration in sales growth. However a fall in sales was reported in other sectors, including hardware & DIY and specialist food & drink.
Elsewhere, wholesaling sales continued to grow robustly in the year to October and volumes are expected to rise strongly again next month.
Rain Newton-Smith, CBI Director of Economics, said, “The clothing sector in particular appears to be bouncing back after the mild weather in September deterred people from buying their winter warmers.”
GBP/USD was trading at 1.6105 from around 1.6102 ahead of the announcement, while EUR/GBP was at 0.7866 from 0.7868 earlier.
Meanwhile, European stock markets were lower. London’s FTSE 100 shed 0.25%, the DJ Euro Stoxx 50 declined 0.7%, France’s CAC 40 slumped 0.45%, while Germany's DAX dropped 0.45%.
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