GBPUSD news - page 32
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BoE Preview: MPC Hawks' Dilemma
The UK inflation rate slowed sharply to 0.5% in December as much of the downward pressure came from gas and electricity price rises from December 2013 falling out of the official statistics in December 2014. A 50% oil price drop in 2014 has translated into a continuing motor fuel price fall that also added to that downward price pressure.
In light of those disinflationary pressures, did Martin Weale and Ian McCafferty, the two hawks sitting on the Bank of England's (BoE) nine-strong rate-setting committee, continue to vote for a rate hike in January?
Some would argue that it would make sense that both Weale and McCafferty dropped their votes in January as Governor Mark Carney prepares a draft of an open letter to Chancellor George Osborne explaining why inflation is so low and what the central bank proposes to do to ensure inflation returns to the target.
In his recent interview with the media, Governor Carney said inflation was expected to fall further down towards zero as fuel prices continued to decline. With this in mind, it would sound more than logical for the rate-setters to unite in maintaining the policy unchanged.
But most of that downward pressure stems from a one-off technical effect as well as the temporary low prices of energy. Carney himself reassured the public last week when he said the BoE would begin to tighten monetary policy in the foreseeable future, despite the current level of consumer price inflation wallowing at a record low.
"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.
MPC Hawks' arguments
Both Weale and McCafferty argued at previous MPC meetings that the monetary policy decisions taken today are to deliver the inflation target in the medium term and, therefore, "it was largely appropriate to look through the short-term effects of such price movements [cheaper oil and other imports]."
Martin Weale already voted for a rate hike back in 2011, when the post-crisis annual CPI peaked at 4.5% for the whole of 2011. At that time, Weale was voting for a 25 basis point rate increase between January and July 2011 before dropping the vote in August, arguing that a significant margin of spare capacity and low pay growth at that time meant inflation was to drop to target in the medium-term.
The UK CPI did reach a post-recession peak of 5.2% in September 2011 before descending to its present level of 0.5% - the joint record low.
At present again, Weale and McCafferty have been arguing that "just as the [MPC] Committee had looked through the first-round effects of external price pressures when they had pushed inflation up, it was appropriate to look through them at present when they were pushing inflation down."
Both Weale and McCafferty also argued at the previous two meetings that a sharply tightening labor market was expected to result in rising wages markedly and "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."
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GBP/USD Trades in Green, Fails to Break $1.52
The pound was seen elevated above $1.51 during the US trading session, bouncing back from its earlier intraday low at $1.5058. Cable stayed in a relatively narrow range in the afternoon and failed to break $1.52 on the data-quiet day in US. GBP/USD remained almost unchanged after the NAHB Housing Market Index posted its reading for last month at 57 points, missing forecasts of 58 points and Federal Reserve Governor Jerome Powell held a press conference in Washington.
The cable was trading 0.33% higher at $1.5158 versus the US dollar, sliding from Tuesday's high of $1.5199.
In the afternoon, traders seemed to be waiting for Wednesday when the Bank of England will reveal the January meeting minutes. An update of the unemployment rate is also duem, with an anticipated decline to 5.9% in November.
US macro data
The single-family housing market should continue to improve at the start of the year, according to executives from US construction companies. The latest reading of the Housing Market Index showed an identical value to that in November at 57 points, failing to meet expectations by a mere 1 point. Moreover, the index remains at its cyclical highs as it averaged almost 57 points over the last six months after hitting a nine-year high of 59 points in September.
Although the Housing Market Index showed another release well above 50 level, the recovery of the housing industry remains slow according to every Fed policy statement in the last year, as many potential buyers were unable to meet the strict underwriting standards imposed after the housing bubble bust, or were stuck with stagnating incomes.
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.
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GBP/USD falls despite U.K. jobs data, BoE minutes weigh
The pound fell against the U.S. dollar on Wednesday, re-approaching 18-month lows despite upbeat U.K. jobs data as the minutes of the Bank of England's latest meeting minutes showed a new consensus in favor of keeping interest rates on hold.
GBP/USD hit 1.5076 during European morning trade, the session low; the pair subsequently consolidated at 1.5106, shedding 0.25%.
Cable was likely to find support at 1.5032, the low of January 8 and an 18-month trough and resistance at 1.5236, the high of January 16.
In a report, the U.K. Office for National Statistics said that the rate of unemployment dipped to 5.8% in the three months to November from 6.0% in the previous three month-period and better than expectations for a reading of 5.9%.
The report also showed that the claimant count fell by 29,700 last month, compared to expectations for a decline of 25,000 people. November’s figure was revised to a drop of 29,600 people from a previously reported decline of 26,900.
Data also showed that the average earnings index rose 1.7% in the three months to November, meeting forecasts, after increasing by 1.4% in the three months to October.
Excluding bonuses, wages rose by 1.8% in the three months to November, below expectations for a gain of 1.9% and following a 1.6% increase in the three months to October.
Separately, the minutes of the BoE's January policy meeting showed that members voted unanimously to keep the asset puschase facility program on hold.
Members also voted unanimously to keep interest rates unchanged at a record-low 0.5%. During the five previous months, board members Martin Weale and Ian McCafferty had consistently voted to raise interest rates to 0.75%.
Sterling was lower against the euro, with EUR/GBP advancing 0.43% to 0.7658.
Sentiment on the single currency remained vulnerable as investors waited to see if the European Central Bank would embark on an outright quantitative easing program on Thursday.
Uncertainty over the outcome of Greek elections, due to be held on Sunday, with anti-bailout party Syriza leading in the polls also weighed.
Later in the day, the U.S. was to release data on building permits and housing starts.
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GBP/USD: Pound Rebounds, Nears $1.52
The UK pound rebounded and traded in positive territory against the US dollar, after a rather sluggish performance seen in the previous session when the currency reacted to the Bank of England's latest minutes that showed two hawkish central bankers shifted their opinion concerning the interest rate hike.
The UK pound rose 0.20% and traded at $1.5171 against the US dollar, retreating slightly from the intraday high hit earlier today.
Analyst from FXTM point out that any gains of the UK currency should be short-lived given the prospects for a UK rate rise for the remainder of the year, while the US dollar is clearly on the winning side as the Federal Reserve has moved closer to a first raise of its borrowing costs.
"Although the UK economy remains the fastest growing in the advanced world and projected growth of 2.7% this year is nothing to roll your eyes at, investor awareness that the BoE have adopted a laissez-faire approach towards raising interest rates - and that prospects for a UK rate rise for the remainder of the year could just be wishful thinking - is basically going to continue reducing investor sentiment towards the GBP," said Jameel Ahmad, Chief Market Analyst at FXTM.
"Bearing in mind all recent USD weakness has been temporary, any sudden USD gains could really put this pair at risk to dropping below 1.50 - which would have been completely unthinkable to even imagine as of August 2014," he added.
On Wednesday the currency came under increased strain after the Monetary Policy Committee (MPC) minutes showed the voting pattern changed during the Bank of England's latest monetary policy meeting, with Martin Weale and Ian McCafferty voting against an interest rate hike together with the other members of the committee.
Earlier today, Bank of England MPC member Professor David Miles delivered a speech in which he said central banks cannot keep inflation at a specific target at all times, using the sharp fall in oil prices and its impact on the UK inflationary pressures as a recent example.
"The pound appears to be ranging for now but we need to see a move beyond 1.5320 to diminish any downside risk. The key support remains at the lows this month at 1.5035, a break of which could see some stops triggered below 1.5000. towards 1.4810," said Michael Hewson, chief market analyst at CMC Markets UK, in his most recent research note to investors.
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Pound Reaches Seven-Year High as ECB QE Boost Damps Euro Appeal
The pound climbed to its strongest level in almost seven years versus the euro after the European Central Bank said it would expand its economic-stimulus program to include buying euro-area government bonds.
Sterling slid against the dollar after data showed Britain had a larger budget deficit in December than analysts forecast and Bank of England policy maker David Miles said slowing inflation has eased pressure on U.K. officials to raise interest rates. ECB President Mario Draghi announced the plan in Frankfurt on Thursday, sending the euro tumbling on bets an expansion of its asset-purchase program would devalue the shared currency. U.K. government bonds were little changed.
“Although a fair amount of euro weakness was priced in prior to today’s announcement, further pressure will be put on the single currency with flow moving towards the dollar and the pound,” said Harry Adams, head of trading at Argentex LLP, a currency advisory company in London. “The ECB have met expectations and possibly exceeded, but time will tell.”
The U.K. currency appreciated 1 percent to 75.93 pence per euro at 4:45 p.m. London time after reaching 75.66 pence, the strongest level since February 2008. Sterling fell 0.6 percent to $1.5052 for a second day of declines. It reached $1.5035 on Jan. 8, the lowest since July 2013.
The ECB will buy private and public securities of up to 60 billion euros ($69 billion) a month until September 2016, Draghi told reporters. Policy makers also kept interest rates at a record low.
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GBP/USD hovers at 18-month lows despite U.K. retail sales data
The pound remained near 18-month lows against the U.S. dollar on Friday, despite the release of upbeat retail sales data as expectations for the Bank of England to hold its monetary policy for longer continued to weigh.
GBP/USD hit 1.4958 during European morning trade, the pair's lowest since July 2013; the pair subsequently consolidated at 1.4985, slipping 0.17%.
Cable was likely to find support at 1.4812 and resistance at 1.5213, Thursday's high.
In a report, the Office for National Statistics said that U.K. retail sales rose 0.4% in December, beating expectations for a 0.6% decline, after a 1.6% increase the previous month.
Year-on-year, retail sales increased by 4.3% last month, more than the expected 3.0% rise, after a 6.4% advance in November.
The pound remained under pressure after the minutes of the BoE's January policy meeting on Wednesday showed that members voted unanimously for the first time in five months to keep interest rates unchanged at a record-low 0.5%.
Sterling was hovering close to seven-year highs against the euro, with EUR/GBP dropping 0.71% to 0.7516.
The euro remained under broad selling pressure after European Central Bank President Mario Draghi on Thursday said it will make monthly purchases of €60 billion per month, starting in March and continuing until late 2016.
Draghi acknowledged the action the ECB took last year was “insufficient” to ward off the threat of deflation in the region. The annual rate of inflation in the euro area fell into negative territory last month, dropping 0.2%.
The single currency shrugged off data on Friday showing that the Markit preliminary composite purchasing managers' index, which measures activity in the manufacturing and services sectors in the euro area, rose to 52.2 this month from a reading of 51.4 in December.
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Pound Rebounds From 1.5-Yr Low in US Session
Sterling picked up from below $1.5000 where it fell earlier due to UK retail sales for December, after US manufacturing and existing home sales delivered worse readings.
The cable was flat at $1.5007, recovering from the lowest level since July 2013 at $1.4951 earlier in the day.
Existing home sales rose 2.4% to an annualized rate of 5.04 million in December, compared to an expected 5.08 million, and following a downwardly revised 4.92 million that was previously reported as a seven-month low of 4.93 million, the National Association of Realtors said on Friday.
Markit's US manufacturing PMI inched down to 53.7 points in January, from December's final 53.9. Analysts expected the figure to come in at 54 points.
UK retail sales
UK retail sales rose above expectations in December on the back of cheaper fuel and a steep rise in food sales.
Retail sales volumes, excluding fuel, declined 0.2% in December after a massive rise of 1.7% a month before. Total sales fell 0.4%, down from a 1.6% rise in November, the Office for National Statistics reported on Friday.
Technical analysis
The sharp fall of GBP/USD continues again after two weeks of consolidation, with moving averages pointing lower on the daily chart.
The intraday timeframe tried to halt a sell-off for a while, but bears stepped in to play at the peak of $1.52 and are now trying to break below $1.5000.
On the longer timeframe of weekly charts, possible support could be found at $1.4800, if the $1.5000 spot definitely cracks.
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GBP/USD Forecast January 26-30 2015
The British pound sustained sharp losses last week, as GBP/USD closed the week below the 1.50 level. This was the first time the pair has slipped below this symbolic level since July 2013. This week’s major event is Preliminary GDP. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.
The pound has had a miserable January, losing over 500 points against the US dollar. Last week, the BOE voted unanimously to hold interest rates, reflective of the low inflation environment in the UK. Retail Sales was better than expected, but this didn’t help the ailing pound, which has dropped below the 1.50 line. In the US, Unemployment Claims disappointed and Existing Home Sales missed expectations.
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Sterling Pares Gains on Disappointing GDP Growth
Sterling shaved earlier gains versus the US dollar as traders swallowed slower-than expected GDP growth for the fourth quarter.
The pound slid around 30 pips, trading only 0.13% higher at $1.5075 versus the dollar right after the disappointing GDP report, retreating from an earlier intraday high of $1.5116.
Michael Hewson, chief analyst at CMC Markets, suggested the possibility of a short squeeze in the near term for the pound.
"The key support remains at the 2013 lows of $1.4810/30. This level is likely to remain key if we are to get a rebound. We need to see a move back through last week’s high at $ 1.5140 or we could well be set for a move towards levels last seen in 2010 where we the pound around $1.4200," Hewson wrote on Tuesday.
UK growth eases in Q4
UK economic growth slowed down to 0.5% in the final three months of 2014, dropping from 0.7% in the third quarter. The figures fell below analysts' expectation.
On an annual basis, GDP rose 2.7% in the fourth quarter, up from 2.6% in the previous quarter, the first estimate of GDP showed.
Technical analysis
The sharp fall of GBP/USD was short lived as sterling returns back to the previous consolidation area between previous support of $1.5000 and resistance at $1.52.
On a longer timeframe on weekly charts, possible support could be found at $1.4800, if the $1.5000 spot definitely cracks.
Eventual spikes toward the $1.52 area offer a good shorting opportunity with a stop loss above the peak of the correction range at $1.52 and target below $1.5000.
Intraday trading has been pretty rangy for the last three weeks with technical oscillators swinging from overbought to oversold conditions.
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UK GDP rises only 0.5% – GBP/USD slides
The UK economy grew by 0.5% in Q4 2014 according to the first release. Year over year, the economy grew 2.7%, also 0.1% below predictions. The ONS says it is too early to say if there is a general economic slowdown in the UK. Indeed, year over year growth is actually up and the country’s growth is still positive and significantly stronger than in 2013.
The small miss weighs on GBP/USD, but the move is not extreme: the pair is down below 1.5060. Update: after the initial drop, cable is recovering back up to 1.5075.
Among the components, we have another steady rise of 0.8% in the services sector, exactly like in Q3. Manufacturing is basically grounding to a halt in the UK with only +0.1%. The energy sector is down 2.8%, but this is only a small part of the economy.
The BBA mortgage approvals also fell short of predictions with 35.7K instead of 36.6K expected.
The United Kingdom was expected to report a growth rate of 0.6% quarter over quarter in Q4 2014 after a rise of 0.7% in Q3. In yearly terms, a rate of 2.8% was predicted, actually higher than 2.6% seen in Q3. This is the preliminary reading for the quarter. Two revisions follow.
GBP/USD flirted with the 1.51 level, after recovering from trading below 1.50 not too long ago.
The pound was hit hard last week by the unanimous decision of the MPC not to raise rates. Cable was also carried lower following a USD rally. Sterling did however gain against the euro.
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