GBPUSD news - page 34
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Bank of England holds key rate at 0.50%, QE unchanged at £375B
The Bank of England kept its benchmark interest rate unchanged in February and announced no change to its asset purchase facility program, it said on Thursday.
The BoE said it was holding the benchmark interest rate at 0.50%, in a widely expected move.
The central bank also said it was to maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion.
The minutes of the meeting of the central bank’s monetary policy committee will be published on Wednesday, February 18.
Minutes from the central bank's January policy meeting showed that the Monetary Policy Committee voted unanimously to keep rates on hold and its quantitative-easing program unchanged.
Martin Weale and Ian McCafferty dropped their vote for a 0.25% hike in the benchmark rate to 0.75% for the first time in six meetings.
GBP/USD was trading at 1.5249 from around 1.5241 ahead of the announcement, while EUR/GBP was at 0.7494 from 0.7498 earlier.
Meanwhile, European stock markets were broadly lower. London’s FTSE 100 shed 0.4%, the EURO STOXX 50 declined 0.7%, France's CAC 40 fell 0.55%, while Germany's DAX slumped 0.3%.
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Pound Defends $1.53 after Trade Balance
The UK trade balance printed a deficit of £2895 million in December, while the previous month's reading was revised down to £-1841 million, the UK Office for National Statistics informed on Friday.
Shortly after the release, cable was trading at $1.53150, unchanged on the day, but with bullish momentum picking up.
Later in the session, the most important macroeconomic indicator will be published, the non-farm payrolls report, along with the unemployment rate in the US. The US jobs report is expected to show a rise by 230K in January and for the unemployment rate to remain steady at 5.6%.
The BoE made no change in its policy on Thursday, keeping the main refinancing rate at 0.5% and the volume of QE purchases at £375 billion. More information about the individual votes and further details will be provided in the BoE's meeting minutes, released later in the month.
The pound has received support during the week from above-forecast UK PMI releases. It started with Monday's better-than-expected manufacturing PMI and continued with an upbeat construction PMI on Tuesday, while Wednesday's services PMI rose to 57.2 in January, above last month's 55.8 and analysts' expectations of 56.3.
"Investors are also wary heading into today’s non-farm payrolls report that it may reveal some moderation in employment growth in January after robust growth throughout last year which is likely weighing on the US dollar. Some leading employment indicators have weakened recently such as the ISM non-manufacturing employment sub-component which declined sharply by 4.1 point to 51.6 in January reaching its lowest level since February of last year. However, overall labour market indicators remain consistent with solid employment growth. " analysts at Bank of Tokyo-Mitsubishi wrote in a research note on Friday.
Technical analysis
"Thursday's break above the recent highs at 1.5270 could well be the catalyst for a move towards 1.5500. This move appears to have completed an inverse head and shoulders that could even extend to 1.5600. For this to unfold we need to hold above the 1.5250 level or we could slide back towards 1.5000," analysts at CMC Markets wrote in a note on Friday.
GBP/USD breaks above $1.5250 and has left the previous trading range behind. The nearest target of sterling can now be seen at $1.55 where prior support is placed.
The daily chart is still trending downward, it needs more time to change the general direction and overall trend.
The preferred trading strategy is to take short when sterling reaches the $1.55 level, with stop loss above it, and profit target at the previous resistance of $1.5250. As long as prices stay above $1.5250, buying the dips toward $1.55 should work fine now, when the direction is established.
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U.K. 2014 Trade Gap Biggest In Four Years
The U.K. trade deficit widened to the highest in four years in 2014 as exports declined sharply than imports, official data revealed Friday.
In 2014, the total trade deficit widened to GBP 34.8 billion, the largest deficit since 2010, when the shortfall was at GBP 37.1 billion, the Office for National Statistics said.
The widening of deficit was attributed to a GBP 14.6 billion decline in exports of goods. Imports of goods declined GBP 7.3 billion, which was the first annual fall in imports since 2009.
"We are clearly not making adequate progress in rebalancing our economy, and the weakening of the Eurozone is creating problems for our exporters," David Kern, chief economist at the British Chambers of Commerce said.
Kern called for much greater efforts to develop a national strategy for boosting exports, with improved access to finance for growing firms.
Due to oil imports, the visible trade gap rose to GBP 10.2 billion in December from GBP 9.3 billion in November. Economists expected a GBP 9.1 billion deficit.
The deficit widened in December as the volume of oil imports reached its highest level since July 2008. It surged 37.5 percent from November.
While December's trade data make for disappointing reading, the surge in oil imports masks a more encouraging underlying picture, Capital Economics' UK economist Paul Hollingsworth said.
With sterling around 15 percent higher on a trade-weighted basis than its 2009 low, and demand in the euro-zone still markedly weak, any further improvement in the trade deficit is likely to be fairly sluggish, the economist said.
While UK growth will clearly remain heavily dependent on domestic demand, the hope for UK exporters has to be that global growth will pick up as 2015 progresses, IHS Global Insight's Chief UK Economist Howard Archer noted.
Data showed that the deficit on trade in goods with EU nations narrowed to GBP 6.4 billion in December from GBP 6.5 billion in the previous month.
Meanwhile, the shortfall with non-EU nations increased to GBP 3.8 billion from GBP 2.8 billion, more than the GBP 3 billion deficit expected by economists.
The balance of trade in services showed a surplus of GBP 7.3 billion versus a GBP 7.4 billion surplus in November. As a result, the total trade, including goods and services, resulted in a deficit of GBP 2.9 billion in December compared to a GBP 1.8 billion shortfall in November.
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GBP/USD forecast for the week of February 9, 201 5
The GBP/USD pair broke higher during the course of the week, after first testing the 1.50 level. With that, the market looks as if it is ready to try to fight its way higher, like a break of the top of the range. However, there is enough resistance above there at the 1.55 level to keep us from doing so as we believe the market will ultimately run into white a bit of resistance there. With that being said, this just isn’t a market that we like trading from a longer-term perspective at the moment.
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GBP/USD started on the back foot at the start of the week, trading at sub-1.50 on Monday. The dollar then started to show signs of weakness as a few technical levels were tripped in EUR/USD, sparking a splurge of short covering. GBP/USD shadowed the pair higher and recovered off of 1.4995 to trade to a high of 1.5187.
UK construction PMI supported the move higher in cable and showed that the Markit index rose to 59.1 in January vs. expectations for 56.9. It indicated that output and new business growth in the construction industry rebounded from December’s lows. Wednesday morning’s UK services PMI for January also printed stronger than expected.
The purchasing managers’ index rose to 57.2 in January, up from a 17 month low of 55.8 in December and beating forecasts for 56.6. GBP/USD made steady gains again on the back of the release, trading to a high of 1.5248.
By Alex Edwards at UKForex, an international money transfer service
Come Wednesday afternoon, the pound started to wobble along with EUR/USD. The ECB announced that it was revoking a waiver that allowed banks to use Greek government debt as collateral for loans, causing the EUR/USD pair to break down through various stops.
The central bank went on to say the “suspension is in line with existing Eurosystem rules, since it is currently not possible to assume a successful conclusion of the programme review”, but that “this decision does not bear consequences for the counterparty status of Greek financial institutions in monetary policy operations”.
Nonetheless, it spooked investors and the dollar – as a safe haven – firmed up across the board. GBP/USD fell back to 1.5170. It’s clear that the ECB are putting more and more pressure on Greece at the moment to come to terms with lenders over its bailout programme.
The single currency recovered later in the week, on the back of reports that the Swiss National Bank was buying EUR/USD and USD/CHF in an attempt to weaken the value of the Swiss franc. However, it faced pressure from the release of US non-farm payrolls on Friday afternoon.
It was another strong US jobs report showing that 257,000 jobs were created in January against expectations for 236,000. The prior two months were revised up too to 423k and 329k, and wages for the month rose by 0.5%. Data like this only serves to underline the divergence between expectations for the Fed’s monetary policy and that of other major central banks, which are either looking to cut rates or leave on hold for a considerable period of time.
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GBP/USD: Cable Edges Higher on Profit Taking
The pair was marginally higher on Monday as some short covering was observed on currency markets, with investors taking profits from a dollar storm after the latest non-farm payrolls report.
The strong psychological support at $1.50 held last week and offered some strength to push higher, but dollar bulls reappeared above the $1.53 handle and gained some support from the solid US labor market data.
The US economy created 257,000 jobs, above expectations of a 230,000 print, but down from last month's revised 329,000, while the unemployment rate ticked higher to 5.7%, the Bureau of Labor Statistics revealed on Friday.
During the European trading hours, cable was seen at $1.5246, mildly higher on the day.
Investors will now closely watch the Bank of England's (BoE) inflation later, which is due on Thursday and might offer some insights into the BoE's future steps.
The BoE made no change to its policy on Thursday, keeping the main refinancing rate at 0.5% and the volume of QE purchases at £375 billion. More information about the individual votes and further details will be provided in the BoE's meeting minutes, released later in the month.
"According to January’s report card, the US labor market is firing on all cylinders, and vindicates the recent (and consistent) Fedspeak pointing toward a mid-June rate hike. Payrolls growth for January surprised on the upside (+257k vs +228k exp.), with 147k of upward revisions to November and December. As a result, over the past three months, more than a million jobs were added to the US economy, for the first time since 1997," Raiko Shareef, currency strategist at the Bank of New Zealand wrote on Monday.
"Importantly, wage growth made a strong showing in these reports (unlike the disappointment in December). In January, average hourly earnings growth at 0.5% m/m, the strongest monthly gain since 2008," he concluded.
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UK manufacturing output beats expectations
Manufacturing output in the UK rose by 0.1% m/m and 2.4% y/y. Industrial output rose 0.1% and 0.5% year over year.
GBP/USD is now ticking up after sliding beforehand.
The UK was expected to report a rise of 0.1% in industrial production in December m/m and +0.7% y/y. manufacturing production carried expectations for a slide of 0.1% m/m but a gain of 1% y/y.
GBP/USD slid from a tight range and traded around 1.5220 towards the publication.
The British pound got a boost last week from a series of positive purchasing managers’ indicators, all pointing to stronger growth in the economy. However, with the Bank of England set to leave rates unchanged throughout most of the year, cable faces a struggle as the US is now set to raise rates earlier.
The big event for sterling this week is the release of the BOE’s Quarterly Inflation Report. This event provides Carney and co. an opportunity to set out their forecasts for employment, growth and inflation.
Many economists are still bearish on cable, with one bank seeing 1.38 on GBP/USD.
GBP/USD edges higher but gains seen limited
The pound edged higher against the U.S. dollar on Wednesday, but gains were expected to remain limited as markets were still jittery amid uncertainty over Greece's future in the euro zone.
GBP/USD hit 1.5297 during European morning trade, the pair's highest since February 6; the pair subsequently consolidated at 1.5283, adding 0.19%.
Cable was likely to find support at 1.4134, the low of February 4 and resistance at 1.5354, the high of February 6.
Investors remained cautious following reports the European Commission could propose a six-month extension to Greece’s existing bailout program at an emergency meeting of the euro group of finance ministers, due to take place later in the day.
Athens is expected to ask for a bridge loan to cover its funding needs until September, and to also propose new economic reforms to replace some of the harshest austerity conditions attached to its bailout.
However, German Finance Minister Wolfgang Schaeuble dampened hopes Wednesday morning, by saying there are no plans to discuss a new agreement.
The pound had strengthened on Wednesday after the Office for National Statistics reported that U.K. manufacturing production rose 0.1% in December, compared to expectations for a 0.1% downtick. November's figure was revised to a 0.8% increase from a previously estimated 0.7% rise.
On an annualized basis, manufacturing production rose at rate of 2.4% in December, above expectations for a gain of 2.0%.
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GBP/USD: Sterling Sinks, in Run-Up to Hard-Hitting Data
The greenback regained the upper hand during the US session on Wednesday after sterling unsuccessfully attempted to break above $1.53 overnight, as traders position for the hardest-hitting economic releases this week.
The market seems to expect the Bank of England will strike a more dovish tone in its principal inflation report (IR) on Thursday, with the economy closer to deflation than ever before, while on the other hand, US retail figures may lend some support to the dollar bulls.
The UK pound depreciated 0.16% against the dollar, buying $1.5230 on Wednesday.
The pair had kicked off the European part of the session with a 65 pips rally that faltered at the $1.53 barrier, before dipping to $1.522 by lunchtime in New York.
Sterling had to forfeit its 5-week high of $1.5352 on Friday, after stellar January US non-farm payrolls gave rise to speculation that a surge in hourly earnings might compel the Federal Reserve to start moving up rates as soon as June.
The anticipation that the US central bank will outpace its British counterpart have led to a nearly 13% rally of the dollar against the pound over the past seven months, with the cross plunging below $1.50 for the first time since July 2013 last month.
Technical analysis
As sterling breaks above the previous resistance of $1.52, this level should now work as a support zone for another swing of a higher high.
As long as prices stay above $1.52, buying the dips toward $1.55 should work fine now, when the direction is established.
But our preferred long-term trading strategy is to go short when sterling reaches the $1.55 level, with a stop loss above it and a profit target at the previous resistance of $1.5250.
All of the most important price action is happening around the level of $1.5200 over/under in last month. This zone is in strong focus for some reason, with maybe lots of options barriers placed there.
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BoE Mulls More QE, or Rate Cut if Low Inflation Persists
The BoE slashed near term inflation outlook but revised up slightly its medium-term inflation predictions, while saying it stands ready to deploy more tools to combat prolonged low inflation.
The Bank of England (BoE) slashed near-term inflation seeing CPI turning negative temporarily in Spring. Medium-term inflation, however, overshoots target in the second half of 2017, the BoE Inflation Report forecast revealed today.
In the open letter to the UK Chancellor, BoE Governor Mark Carney said there are risks to inflation outlook on both sides while first time publicly admitting the BoE stands ready to expand the current volume of quantitative easing (QE), or cut the base rate further if low inflation persists.
On the downside, "the near-term inflation could be more persistent than the Committee currently expects," Carney wrote in the open letter, adding that "global activity could disappoint further or if low inflation were to depress inflation expectations, it could become self-reinforcing."
To offset those possible events, Carney said the path to more normal policy could be even longer and more gradual. Carney also admitted the MPC could deploy more asset purchases into its current pool of £375 billion, or cut the base interest further below 0.5%. Carney writes that a further reduction in the bank rate could have less undesirable effects on the supply of credit to the UK economy than previously judged given the stronger capitalization of banks today.
To the upside, “inflationary pressure could be greater if lower oil prices were to provide greater stimulus to global and domestic growth or if slack in the economy were to be absorbed more quickly than in the central projection,” Carney wrote. If those risks materialized, then the BoE would have to act faster, “but the likelihood is that those increases would still be more gradual and limited than in the previous tightening cycles.”
According to fresh forecasts, the BoE sees the CPI inflation at 0% in the second quarter of 2015, saying it may turn negative in Spring. Inflation should then bounce back up at the turn of the year as cheap oil data drops out of annual comparisons.
The BoE also revised up medium-term inflation slightly when compared to the November forecast. It expects inflation to overshoot the 2% target in the third quarter of 2017 before crawling up to 2.2% at the end of the forecast period in Q1 2018.
Today's forecasts also showed annual GDP growth in 2015 has been unchanged at 2.9% while growth in 2016 has been revised up to 2.9% from 2.6% estimated in November. The GDP is then seen slowing to 2.7% in 2017. The IR also showed the slack has been tightening faster than estimated and is expected to be fully used up in the middle of the BoE's forecast horizon. In Q4 2014, the BoE expects a 0.6% growth after the final estimate.
On labor market, the policymakers left the projections broadly unchanged in February. They see the jobless rate at 5.6% in the first quarter of 2015 and 5.4% at the same time next year. Today's Inflation Report data also showed the slack has been used up faster than estimated and is expected to be fully used up in the middle of the BoE's forecast horizon.
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