GBPUSD news - page 31
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GBP/USD: Sterling Rebounds After Visiting $1.51
The pound corrected losses versus the US dollar during the North American session on Monday, after testing the $1.51 level earlier in the day, when market players supported the dollar due to strong non-farm payrolls.
The pound was seen 0.09% lower at $1.5143 versus the greenback, correcting after easing to $1.5098 earlier in the session.
In a moment, the Federal Reserve will release the Labor Market Condition Index for the month of December - a useful indicator for assessing changes in labor market conditions. It is derived from a dynamic factor model that extracts the primary common variation from 19 labor market indicators.
UK inflation
The UK inflation, on a yearly basis, is expected to fall below the 1% handle for the first time in 13 years, which may lead the Bank of England (BoE) to postpone its rate hike to 2016, as slowing inflation and the deteriorating economic situation in Europe is expected to subdue the UK economy in the coming months.
The UK consumer price inflation is forecast to have slowed to 0.7% in December, while the core inflation should experience only a slight improvement to 1.3%, up from the 1.2% growth booked in December.
Until now, the market had been pricing a rate hike in the second half of 2015 and this has been supporting sterling on currency markets. Should bank Governor Mark Carney confirm that the BoE may postpone raising rates to 2016, the pound might come under selling pressure.
"With inflation data from the UK released tomorrow, there may have been some pound selling last week based on the near 100% certainty that BOE Governor Carney will have to write his first letter to Chancellor Osborne explaining why inflation has fallen below 1.0% for the first time since 2002. Of course, the answer is pretty obvious and we would expect Governor Carney to highlight the transient nature of the inflation drop," analysts at Bank of Tokyo-Mitsubishi wrote in a note on Monday.
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U.K. Inflation Rate Drops to 0.5%, Lowest in Almost 15 Years
Britain’s inflation rate fell to the lowest in almost 15 years in December, which will force Governor Mark Carney to write the Bank of England’s first open letter explaining why prices are rising too slowly.
Consumer-price growth weakened to 0.5 percent from 1 percent in November, the Office for National Statistics said in London today. That’s the lowest since May 2000 and below the 0.7 percent median forecast of 37 economists surveyed by Bloomberg News. A separate report showed factory-gate prices recorded their biggest annual drop in five years.
The pound extended its decline against the dollar after the data were published and was at $1.5099 as of 9:33 a.m., down 0.5 percent from yesterday. U.K. 10-year gilts advanced.
Plunging oil costs and supermarket price wars are driving the sharp slowdown in U.K. inflation. With price growth below the BOE’s 2 percent target and a weak euro-area economy damping export demand, that’s helping Carney and his majority on the Monetary Policy Committee justify keeping the key interest rate at a record-low 0.5 percent.
The consumer-price data showed that food prices plunged 1.9 percent in December from a year earlier amid price cuts by supermarket chains including Tesco Plc and Wal Mart Stores Inc.- owned Asda to fend off competition from discounters. Reflecting the drop in crude oil, the price of gasoline has fallen about 18 percent from its 2012 peak, according to the statistics office.
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Sterling firm near 6-year high against weakened euro
Sterling hit a more than six-year high against the euro on Wednesday after an adviser to Europe's highest court left the door open to the European Central Bank embarking on outright government bond buying.
Sterling also rose against the dollar with the greenback fell on weaker-than-expected retail sales data out of the United States. Retail sales fell 0.9 percent in December as demand fell nearly across the board. It was the largest decline in 11 months.
Sterling was up 0.3 percent on the day at 77.44 pence per euro, having risen to as high as 77.33 pence per euro earlier in the day. Against the dollar, it was up 0.4 percent at $1.5220.
Traders said the pound was still drawing support from expectations the UK economy would outstrip its peers in Europe.
While a fall in inflation and some more measured numbers on growth have led investors to push back the timeline on a first rise in Bank of England interest rates, that outlook still contrasts with the threat of deflation facing the euro zone.
Bank of England chief Mark Carney told a panel of lawmakers that recent drop in oil prices was positive for the UK economy.
The euro weakened broadly on Wednesday after an adviser to the European Court of Justice said an ECB bond-buying programme was legal under certain conditions.
The ECB wraps up its next policy meeting on Jan. 22.
Stephen Gallo, an FX strategist at BMO, said the market, and importantly central bank reserve managers globally, seem to be adding to their long sterling positions versus the euro.
"Given monetary policy divergence between the BoE and the ECB, I'm sceptical that the market is overly short of pounds," he said.
"You would think the market is net short sterling against the dollar but reserve managers have probably moved to being net sellers of the euro. We think the pound will head into the 76-76.50 area against the euro but will base thereafter."
Still, Gallo agrees with a raft of strategists who expect the pound to weaken against a stronger dollar this year.
Also, Britain is facing the most open and uncertain general election of modern times in May, even as the country struggles with growing fiscal pressures and a current account deficit running of around 6 percent.
"While Carney highlighted the positives for the UK economy from low inflation we expect the sterling downtrend to remain in place," Morgan Stanley said in a note. "Sterling rebounds remain a sell, in our view, and we maintain our medium term target for a decline into the $1.40 area."
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GBP/USD edges higher but gains in check
The pound edged higher against the U.S. dollar on Friday, but were held in check as demand for the greenback remained broadly supported despite Thursday\'s mixed bag of U.S. data.
GBP/USD hit 1.5225 during European morning trade, the session high; the pair subsequently consolidated at 1.5212, adding 0.20%.
Cable was likely to find support at 1.5074, the low of January 13 and resistance at 1.5270, the high of January 14.
The dollar showed little reaction to data on Thursday showing that the number of people who filed for unemployment assistance in the U.S. last week rose to a four-month high of 316,000, compared to expectations for a decline of 6,000.
A separate report showed that U.S. producer prices fell by the most in three years in December, falling 0.3% as energy costs tumbled.
In addition, the Federal Reserve Bank of Philadelphia said that its manufacturing index deteriorated to an 11-month low of 6.3 this month from December’s reading of 24.5, while the New York Fed said that its general business conditions index increased to 10.0 this month from a reading of -3.6 in December.
Meanwhile, sentiment on the pound remained vulnerable after data earlier in thw week showed that the annual rate of consumer inflation in the U.K. slowed to 0.5% last month from 1.0% in November. Economists had expected a smaller decline to 0.7%.
The slowdown in inflation underlined expectations that the Bank of England will keep interest rates on hold at record lows for most of this year.
Sterling was higher against the euro, with EUR/GBP shedding 0.29% to 0.7636.
The euro was hit after the Swiss National Bank on Thursday scrapped the 1.20 per euro exchange rate floor it imposed in September 2011, in a bid to stave off deflation and prevent the continued appreciation of the safe-haven franc.
The move indicated that the SNB sees a high likelihood that the European Central Bank will implement quantitative easing measures at its upcoming meeting next week.
Later in the day, the U.S. was to release a report on industrial production and preliminary data on consumer sentiment.
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Sterling in Red After Buoyant US Confidence Data
Sterling lost intraday momentum during European trading hours and fell further into negative territory amid a series of US macroeconomic releases.
The cable slid to $1.5075 after the update of a preliminary consumer sentiment index, based on a survey conducted by Reuters and the University of Michigan (UoM), increased to 98.2 in January, up from December's final 93.6.
Nevertheless, the five-day low around the $1.5070 level withstood the breakout as a recent rebound in stock markets dragged the cable slightly higher.
The pound was seen 0.25% lower to trade at $1.5137, waiting for next week's incentives from the Bank of England's meeting minutes and the labor market report.
US macro data
The annual rate of consumer prices came in at 0.8% in December versus the 0.7% anticipated by analysts after registering 1.3% in November, while it hit 1.6% after excluding food and energy.
Industrial production dropped 0.1% in the final month of the past year, compared to the gain of 1.3% booked a month ago.
A preliminary consumer sentiment index, based on a survey conducted by Reuters and the University of Michigan (UoM), rose to 98.2 in January, up from December's final 93.6.
The Philadelphia Federal Reserve manufacturing index for January posted a worse-than-expected release of 6.3 points, below the forecast of 18.6 points. The index experienced a third straight drop, sliding from its peak of 40.8 in November.
Technical analysis
The sharp fall of GBP/USD was halted, but remains in a clear downtrend on a daily timeframe.
Intraday charts have been trying to halt a sell-off for a while and very likely short-term bottoming action is seen on the hourly charts above the $1.52 mark.
A clear support trendline drawn from a swing low of $1.5033 through a swing of $1.51 is now supporting prices around $1.5150 where the 50- period day moving average is also placed. If the trendline cracks, sterling will be testing swing lows around $1.5000.
On a longer timeframe perspective, this steady and mild intraday trend up is just a correction to a persisting downtrend on a daily timeframe, which could offer a good short selling opportunity if goes higher to the $1.53-54 area.
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GBP/USD forecast for the week of January 19, 2015
The GBP/USD pair went back and forth during the course of the week as you can see, but the one thing that it did in fact show was that the 1.50 level continues to be very supportive. With that being said, we anticipate that this market will then head to the 1.55 level given enough time, and as a result we believe that short-term buyers will probably move this market. We have no interest in selling, so therefore we do see the ability to buy this pair, but longer-term players may have issues with the lack of space.
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UK Preview: Heavy Data Week to Shape Market Sentiment
Bank of England (BoE) watchers and other market participants will be closely watching on Wednesday next week to see whether the two dissenting members of the nine-strong rate-setting committee, Martin Weale and Ian McCafferty, continued to vote for a rate hike in January.
Some analysts raised concerns that the two members might have dropped their vote in light of sharply falling inflation. Both Weale and McCafferty have not been heard speaking publicly since the last Monetary Policy Committee (MPC) minutes, so markets do not have much new knowledge to predict how the committee voted in January.
Consumer price inflation dropped to the record low of 0.5% in December and is expected to fall further in the coming months as prices of fuel continue to decline. This should offer the BoE more leeway to maintain ultra-loose policy without stoking any significant upward price pressures.
In December, both Weale and McCafferty argued that the central bank should see beyond the temporary effects of cheaper oil and other imports, arguing that a sharply tightening labor market can soon be expected to increase domestic price pressures sharply.
The two dissenting members said that "since monetary policy could be expected to operate only with a lag, it was desirable to anticipate labor market pressures by raising the Bank Rate in advance of them." The latest two MPC minutes showed a similar view had also been forming among some members within the dovish majority of the MPC.
Speaking to the BBC on January 13, BoE Governor Mark Carney said that the monetary policy is expected to normalize despite the current low level of inflation.
"It’s a question of the pace of those interest rate increases and the degree. Relative to a year ago it’s probably a little more gradual and a little more limited than it was then, largely because of factors outside our shores, there are these disinflationary or low inflation pressures globally. But we are still in a world where we would expect to start to what we call normalize policy, raise interest rates, over that horizon," Carney said.
Domestic price pressures, wage growth in spotlight
Apart from the external factors, much will also depend on the domestic price pressures, especially in form of wage growth and income growth. Markets will learn more about those on Wednesday, January 21, when new UK labor data are published.
Howard Archer of IHS Global Insight wrote in his preview on Friday that "earnings growth is expected to have extended its recent upwards trend in November, taking it further above consumer price inflation and boosting consumer purchasing power."
The latest data showed earnings excluding bonuses picked up to 1.6% in the quarter to October, up from 1.2% in the quarter to September and 0.9% in the quarter to August. Economists form IHS Global Insight expect average earnings rising by 1.8% year-on-year in the three months to November, which would be above the November inflation level of 1%.
Policymakers Weale and McCafferty argued that "survey evidence of a tightening in the labour market suggested that wage growth might pick up sharply as slack was absorbed…and since monetary policy could be expected to operate only with a lag, it was desirable to anticipate labour market pressures by raising Bank Rate in advance of them."
Partly due to significantly low inflation, the BoE kept monetary policy unchanged in January. Economists expect the first round of policy tightening as early as August this year or as late as February 2016.
The unemployment rate in Britain has been falling sharply over the last two years, from 8.4% measured in January 2012 down to 6.0% in the quarter to October last year.
According to the study by the Chartered Institute of Personnel and Development (CIPD), employment in the UK is estimated to rise by a further half a million over the course of this year, while wage growth is expected to remain in the range between 1% and 2% for most or all of 2015.
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UK House Prices Rise 1.4% In January - Rightmove
The average asking price for a house in the United Kingdom was up 1.4 percent on month in January, property tracking website Rightmove said on Monday.
That follows the upwardly revised 2.2 percent contraction in December (originally -3.3 percent).
On a yearly basis, house prices jumped 8.2 percent following the 7.0 percent spike in the previous month.
Cable Waiting for Incentives, Circles Around $1.51
Sterling hovered around the previous close at $1.51 versus the US dollar on Tuesday, with a clearer direction perhaps coming after the Bank of England's (BoE) minutes release later in the week.
The pound edged down 0.07% to $1.5098 versus the greenback, picking up from the previous session slump to a one-week low $1.5074.
"The lack of any rebound suggests we could be set for a move lower but while we hold above 1.5090 the prospect of a move back towards 1.5320 remains. A move below 1.5090 targets the lows this month at 1.5035, with a break below 1.4980 targeting 1.4810," Michael Hewson, chief market analyst at CMC Markets, said in a note on Tuesday.
BoE Minutes
The BoE Monetary Policy Committee's (MPC) January meeting minutes, reporting the vote of each member during the recent meeting, will be released on Wednesday. The benchmark interest rate was held at a record low of 0.5%. The report will show how the nine members voted, as well as the arguments for and against maintaining the current policy stance.
"The minutes of the January meeting of the BoE's MPC (out Wednesday) are likely to show that there was once again a 7-2 vote in favor of keeping interest rates at 0.50%. There was undoubtedly a 9-0 vote in favor of keeping the stock of Quantitative Easing unchanged at £375 billion," Howard Archer, chief UK and European Economist of IHS Global Insight, wrote in a note to clients on Friday.
"Despite current rapidly moderating consumer price inflation, we suspect that Martin Weale and Ian McCafferty continued to vote for an interest rate hike at the January MPC meeting," he added.
The unemployment rate in the country is expected to decline slightly to 5.9% in November from 6% reported a month ago, with the report due on Wednesday.
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GBP/USD: Sterling Escapes Shackles and Breaks Above $1.51
The UK pound broke higher from the $1.51 level on Tuesday, rebounding from its twelve-day low where it fell earlier in the session, supported by the expectation of UK data in the next session.
The cable rose 0.32% to $1.5157 versus the greenback, shaving off its session's low at $1.5077.
The Bank of England's (BoE) Monetary Policy Committee's (MPC) January meeting minutes, reporting the vote of each member during the recent meeting, will be released on Wednesday. The benchmark interest rate was held at a record low of 0.5%. The report will show how the nine members voted, as well as the arguments for and against maintaining the current policy stance.
"The minutes of the January meeting of the BoE's MPC (out Wednesday) are likely to show that there was once again a 7-2 vote in favor of keeping interest rates at 0.50%. There was undoubtedly a 9-0 vote in favor of keeping the stock of Quantitative Easing unchanged at £375 billion," Howard Archer, chief UK and European Economist of IHS Global Insight, wrote in a note to clients on Friday.
"Despite current rapidly moderating consumer price inflation, we suspect that Martin Weale and Ian McCafferty continued to vote for an interest rate hike at the January MPC meeting," he added.
The unemployment rate in the country is expected to decline slightly to 5.9% in November from 6% reported a month ago, with the report also due on Wednesday.
Technical analysis
The sharp fall of GBP/USD has been halted, but it remains in a clear downtrend on a daily timeframe.
Intraday charts have been trying to halt a sell-off for a while and short-term bottoming action is seen on the hourly charts as long as sterling stays in a trading range and above $1.5000.
On a longer timeframe perspective, this steady and mild intraday sideways trend from the bottom of $1.5033 is just a correction to a persisting downtrend on a daily timeframe, which could offer a good short selling opportunity if it goes higher to the $1.53-54 area.