GBPUSD news - page 29
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GBP/USD forecast for the week of December 22, 2014
The GBP/USD pair fell during the bulk of the week, but bounce slightly in order to form something along the lines of a hammer. At the end of the day, and looks as if we are trying to find support near the 1.55 level. With that, we think that eventually this market bounces significantly, and then heads to the 1.60 handle. We have no interest in selling this market at least until we get below the 1.55 handle, which we do not anticipate to see happening this week.
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GBP/USD falls to fresh 15-month lows after U.K. data
The pound fell to fresh 15-month lows against the U.S. dollar on Tuesday, after a batch of mixed economic reports from the U.K. and as expectations for a U.S. rate hike next year continued to support demand for the greenback.
Trading volumes were expected to remain light this week with many investors away for the Christmas holiday and ahead of the New Year's holiday.
GBP/USD hit 1.5552 during European morning trade, the pair's lowest since September 2013; the pair subsequently consolidated at 1.5564, slipping 0.16%.
Cable was likely to find support at 1.5504 and resistance at 1.5667, Monday's high.
In a report, the Office for National Statistics said the U.K. current account deficit widened to £27.0 billion in the third quarter from £24.3 billion in the second quarter, whose figure was revised from a previously estimated deficit of £23.1 billion.
Analysts had expected the current account deficit to narrow to £21.9 billion in the last quarter.
A separate report showed that U.K. gross domestic product rose 0.7% in the third quarter, in line with expectations and down from a 0.8% growth rate in the three months to June.
Year-on-year, the U.K. economy grew at a rate of 3.6% in the last quarter, above expectations for growth of 3.0% and unchanged from the second quarter's revised rate, which had initially been estimated at 3.0%.
In addition, the British Bankers' Association reported that mortgage approvals rose by £36,700 in November, after an increase of £37,200 in October, whose figure was revised from a previously estimated £37,100 gain.
Analysts had expected mortgage approvals to rise by £37,100 last month.
Meanwhile, the dollar remained broadly supported after the Federal Reserve signaled last week that it was on track to raise interest rates next year but said it was taking a patient stance.
The central bank also acknowledged the improvement in the U.S. labor market and noted that the economy is making progress toward its goals in inflation and employment.
Sterling was also lower against the euro, with EUR/GBP adding 0.24% to 0.7863.
Also Tuesday, official data showed that French consumer spending rose 0.4% in November, beating expectations for a 0.3% gain. French consumer spending fell 0.8% in October, whose figure was revised from a previously estimated 0.9% decline.
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U.K. Productivity Improves In Q3
British labor productivity improved during three months to September for the first time since the second quarter of 2013, data from the Office for National Statistics showed Wednesday.
Output per hour increased 0.6 percent sequentially in the third quarter, after staying flat a quarter ago. This was the first expansion since the second quarter of 2013.
Productivity rose 0.3 percent from the same period of last year, the first increase this year, following a 0.6 percent fall in the second quarter.
Nonetheless, productivity remained about 2 percent below its level prior to the economic downturn in 2008, the ONS said.
Output per hour increased in all of the main industrial groupings in the third quarter, by 0.5 percent in the production industries and 0.6 percent in the service industries.
If productivity has taken a significant lasting hit, it means that the economy has less potential to grow without generating inflationary pressures and that interest rates will need to rise at an earlier stage, IHS Global Insight's Chief UK Economist Howard Archer said.
The recent marked overall pick up in business investment will have positive implications for future productivity growth, he noted.
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GBP/USD forecast for the week of December 29, 2014
The GBP/USD pair fell during the bulk of the week, but bounce off the 1.55 handle. This area is of course a large, round, psychologically significant number, and as a result it would not surprise us at all to see this market bounce a little bit from here. Nonetheless, this is a market that is most certainly in a negative downtrend, and we think that rallies will offer selling opportunities given enough time. A break below the bottom of the candle for the week would also be a selling opportunity, as we should then head to the 1.50 handle.
GBP/USD Forecast Dec. 29 – Jan. 2
The British pound continued its downward trend last week, as GBP/USD lost about 80 points last week. The pair closed the week at 1.5617. This week’s highlight is Manufacturing PMI. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.
In the US, the final read of GDP for Q3 was excellent, with a rate of 5% annualized growth. Unemployment Claims looked sharp, but durable goods orders and housing data was rather weak. In the UK, it was a quiet week leading into Christmas and the British markets were closed on Thursday and Friday.
* All times are GMT
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GBP/USD edges higher but gains seen limited
The pound edged higher against the U.S. dollar on Monday, but gains were expected to remain limited as sustained optimism over the U.S. economic recovery continued to lend broad support to the greenback.
Trading volumes were expected to remain light this week ahead of the New Year's holiday.
GBP/USD hit 1.5586 during European morning trade, the pair's highest since December 23; the pair subsequently consolidated at 1.5573, adding 0.10%.
Cable was likely to find support at 1.5501, the low of December 24 and resistance at 1.5667, the high of December 22.
The dollar remained broadly supported after final data last week showed that U.S. gross domestic product rose 5.0% in the third quarter, exceeding expectations for a growth rate of 4.3% and up from 3.9% in the three months to June.
The strong data fuelled further optimism over the strength of the U.S. economic recovery and added to expectations for the Federal Reserve to raise interest rates next year.
The pound found some support after data on Friday showed that U.K. GDP rose 0.7% in the third quarter, in line with expectations and down from a 0.8% growth rate in the three months to June.
Year-on-year, the U.K. economy grew at a rate of 3.6% in the last quarter, above expectations for growth of 3.0% and unchanged from the second quarter's revised rate.
Sterling was steady against the euro, with EUR/GBP dipping 0.01% to 0.7830.
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GBP/USD edges higher but upside seen limited
The pound edged higher against the U.S. dollar on Tuesday, but gains were expected to remain limited as demand for the greenback continued to be underpinned and concerns over political instability in Greece still weighed on market sentiment.
GBP/USD hit 1.5548 during European morning trade, the session high; the pair subsequently consolidated at 1.5535, adding 0.08%.
Cable was likely to find support at 1.5484, the low of December 23 and a 16-month low and resistance at 1.5667, the high of December 22.
The dollar remained broadly supported after final data last week showed that U.S. gross domestic product rose 5.0% in the third quarter, exceeding expectations for a growth rate of 4.3% and up from 3.9% in the three months to June.
The strong data fuelled further optimism over the strength of the U.S. economic recovery and added to expectations for the Federal Reserve to raise interest rates next year.
Meanwhile, markets were jittery after Greek Prime Minister Antonis Samaras said on Monday that he will recommend parliamentary elections are held on January 25, almost 18 months before his coalition's term was due to end.
The announcement came as Samaras failed in his third attempt to persuade lawmakers to back his candidate for head of state, forcing the legislature’s dissolution.
Earlier Tuesday, the Nationwide Building Society said that U.K. house price inflation rose 0.2% this month, confounding expectations for an increase of 0.3%, after a 0.3% gain in November.
Year-on-year, U.K. house prices rose 7.2% in December, below expectations for a 7.5% gain, after an increase of 8.5% the previous month.
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U.K. Housing Equity Withdrawal Falls In Q3
Housing equity withdrawal by individuals in the U.K. decreased further in the third quarter, data from the Bank of England showed Wednesday.
Housing equity withdrawal, or HEW, fell to -GBP 10.87 billion in the third quarter from -GBP 10.56 billion in the second quarter.
HEW as a percentage of post-tax income fell 3.5 percent on a quarterly basis after the 3.4 percent drop in the previous quarter.
GBP/USD 2015 Outlook: Fed and BoE on Parade
Both internal and external developments suggest the Bank of England could begin to tighten monetary policy shortly ahead or in tandem with the Federal Reserve, which should in turn support both the US dollar and sterling towards the second half of the coming year.
The most significant spike in sterling's price came in June 2014, minutes after Governor Mark Carney's famous Mansion House speech before peaking at $1.7191 in July, its strongest since October 2008.
Since July, when the macro data began to soften and the euro zone crisis persisted, the top BoE officials began to talk down sterling by again strengthening their dovish position. Some support then came in August, when two MPC members, Martin Weale and Ian McCafferty, split from the majority of seven members and began voting for a 25 basis point rate hike through December. The result from the Scottish referendum in September also added some strength to sterling only for it to slide back to hit the 2014 H2 bottom at $1.5486 on December 23. On a year-to-date basis, the pound has retreated 5.9% against the greenback.
In 2015, two major events are expected to shape sterling's curve. First, it is the political uncertainty ahead of May's general elections which is expected to weigh on the pound. The second is the perception of divergence between the Bank of England (BoE) and the Federal Reserve (Fed) in the timing for the first rate hike.
Political uncertainty to weigh on sterling
Sterling is likely to struggle toward the May general elections. Bickering politicians in Westminster and the prospects of thorny post-election negotiations will most likely increase nervousness among investors, with the UK currency suffering some downward pressure.
Westminster saw the first post-World War II hung parliament after the latest parliamentary elections back in May 2010. The historical charts show the pound was falling sharply against the US dollar before the 2010 polls as political uncertainty was rising. Sterling then bounced back and rose some 5.3% between May and December 2010 after the dust settled and Conservatives and Liberal Democrats formed the government.
In its open letter to Westminster published on December 29, the British Chambers Commerce (BCC) called on the politicians to "put the UK's long-term success over tawdry political tactics and point-scoring … that is creating greater uncertainty among businesses and putting the UK’s future prosperity at risk."
With the populist political parties on the rise in the UK, the level of downward pressure on sterling next year will also depend on the speed and legitimacy of the next government in Westminster.
BoE or Fed?
Next year should also see an end to the prolonged streak of ultra-accommodative monetary policy both in the US and the UK.
The combination of stronger-than-expected GDP in the US and weaker, downwardly revised, growth figures in the UK sent sterling down markedly on December 23, with some market participants increasing their bets that stronger US data may lead the Fed to tighten monetary policy sooner than the BoE.
The FOMC minutes from December reiterated that the benchmark federal funds rate would be maintained for a "considerable time," while stating that officials will be "patient" in normalizing interest rates.
Despite weaker-than-estimated GDP figures, growth in the UK is set to continue on a strong footing throughout the next year. Also, the BoE tends to be a bit more upbeat on the overall UK economy than the official statistics may suggest and therefore the reaction from policymakers to the above-mentioned downward revisions remains a question.
Banks strong enough to offset shocks
Regarding the resilience to financial market volatility, the UK banking sector and regulators have gone through the wider reforms and are now significantly better equipped to cope with shocks stemming from normalizing monetary policy. The BoE's latest stress tests - designed under shocking scenario of interest rates rising up to 4% in two years and sterling plunging 30% - showed seven out of eight major UK lenders are strong enough to offset major market shocks.
On the price stability front, inflation remains significantly weak for now but the primary downward pressure on the CPI inflation is only temporary, such as cheap oil, while the impact of a policy decision made today will translate into its full effect only after two years, until when those one-off factors may well dissipate. This should partly offer the BoE enough confidence to begin with at least one 25 basis point rate hike sometime in the second half of the next year in order to stick to its promise of 'gradualism' in a process of policy normalization.
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GBP/USD approaches 17-month lows as U.K. PMI disappoints
The pound declined against the U.S. dollar on Friday, approaching 17-month lows after the release of disappointing U.K. manufacturing activity data and as expectations for a U.S. rate hike this year lent broad support to the greenback.
GBP/USD hit 1.5495 during European morning trade, the pair's lowest since December 23; the pair subsequently consolidated at 1.5481, retreating 0.62%.
Cable was likely to find support at 1.5484, the low from December 23 and a 16-month low and resistance at 1.5621, the high from December 31.
Research group Markit said the U.K. manufacturing purchasing managers' index slipped to 52.5 this month from a reading of 53.5 in November. Analysts had expected the index to rise to 53.6 in December.
A separate report showed that U.K. mortgage approvals rose by £59,030 in November, beating expectations for an increase of £58,530. October's figure was revised to a £59,510 gain from a previously estimated £59,430 rise.
Meanwhile, the dollar remained broadly supported as a recent string of upbeat U.S. data sparked optimism over the strength of the country's economic recovery and added to expectations for the Federal Reserve to soon raise interest rates.
Elsewhere, investors continued to focus on developments in Greece, where parliament was formally dissolved on Wednesday after Prime Minister Antonis Samaras failed earlier in the week to persuade lawmakers to back his candidate for head of state, casting the country's international bailout into doubt.
Parliamentary elections were set for January 25, almost 18 months before the current coalition's term was due to end.
Sterling was also lower against the pound, with EUR/GBP rising 0.26% to 0.7785.
In the euro zone, Markit said the bloc's manufacturing PMI fell to 50.6 in December from 50.8 in November. Analysts had expected the index to remain unchanged this month.
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