GBPUSD news - page 42
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Pound Keeps Steady After Construction PMI
Sterling was steady above $1.48 against the greenback after a fresh batch of UK construction data.
The pound hiked 0.10% to $1.4834, after trading in a narrow range between $1.4816 and $1.4867 so far for the day.
The UK construction PMI ticked down to 57.8 in March, from February's 60.1, while it was expected to edge to 59.8.
On Tuesday, the pair widely ignored the UK manufacturing PMI reading, which edged up to 54.4 points in March, compared to a reading of 54.0 in February.
"In the US, after the disappointment of yesterday's misses on the March ADP employment and the ISM manufacturing report, attention will shift to this afternoon's weekly jobless claims which showed a sharp drop last week to 282k. Expectations are for a slight increase to 286k, but it will be tomorrow’s US employment report, which will be of particular interest after yesterday's ADP report dropped below 200k for the first time since January last year, coming in at 189k and well below the 225k expected," Michael Hewson from CMC Markets UK wrote on Thursday.
The ADP employment report unveiled worse-than-expected results as only 189,000 jobs were created in March, compared to an estimate of 225,000, a drop from the slightly revised 214,000 a month before. The figures are just a precursor to Friday's highly awaited non-farm payrolls report, however.
The non-farm payroll figures are expected to show 250,000 jobs added to the economy, which is below the 12-month average of 275,000.
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U.K. Construction Growth Slows On Output, New Orders
The U.K construction sector expanded at a slower-than-expected pace in March, largely due to weaker growth of output and new orders, survey data from Markit Economics and the Chartered Institute of Procurement & Supply showed Thursday.
Nonetheless, confidence among companies rose to the highest level in over nine years, helped by improving economic fundamentals and strong order books.
The CIPS/Markit construction Purchasing Managers' Index fell to 57.8 in March from 60.1 in the previous month. It was forecast to drop to 59.8.
However, any reading above 50 indicates expansion in the sector. The latest reading signaled a strong rate of construction output growth, but below the average for 2014 as a whole.
Despite the headline index dipping in March, this is still a relatively upbeat survey which seemingly points to the construction sector being in decent shape, IHS Global Insight's Chief UK Economist Howard Archer said.
The survey indicates that the construction sector should have seen appreciable growth in the first quarter and contributed to GDP growth, the economist added.
All broad areas of construction reported a loss of momentum since February, Markit said. Housing remained the best performing sub-sector, followed by commercial construction. At the same time, civil engineering output growth eased notably since February.
New business volumes continued to rise at a strong pace in March, but the rate of expansion eased from February's four-month high. Improving economic conditions and greater underlying client demand underpinned upturn in new orders.
Some firms noted that uncertainty related to the general election in May had encouraged clients to delay spending decisions.
The survey signaled an element of caution among construction companies in terms of additional job hiring. Employment level in the construction sector rose at the least marked since December 2013.
Meanwhile, sub-contractor availability continued to fall sharply, which in turn contributed to the steepest increase in sub-contractor charges since the survey began in April 1997.
On the price front, input price inflation accelerated in March due to stock shortages at suppliers and robust demand for construction materials.
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How the Pound was Undercut by a Booming UK Population
The British pound exchange rate complex has come under pressure on the first day of trade in the new month.
As long as there are people willing to join a labour force for relatively little return in wages, the existing work force is unlikely to see their own pay packets increase.
The declines come off the back of the rally higher seen on Tuesday when the ONS reported that the UK economy grew an impressive 3% in the year to March.
It would appear that the problem for sterling lies with another set of data out from the ONS on Wednesday - that relating to the productivity of the workforce.
The Good News: Manufacturing Sector is Firing on all Cylinders
The first set of PMI numbers for the month of April are out - and it is good news.
UK manufacturing hit an 8 month high in March with a reading at 54.4; currency markets had priced sterling for a reading of 54.3.
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply says the manufacturing sector has provided further evidence that the UK economy is in “rude health” and manufacturers are faced with a glut of new orders.
Is it any wonder that 100 business bosses took the unprecedented step of saying they were backing a continuation of the current Conservative-Lib Dem approach to business?
The Bad News: Productivity Stalls as Our Population Expands
The reason that the British pound has failed to take full advantage of the strong manufacturing sector data lies with the other set of data released today.
It was reported that UK labour productivity, as measured by output per hour, fell by 0.2% in the fourth quarter of 2014 compared with the previous quarter.
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GBP/USD forecast for the week of April 6, 2015
The GBP/USD pair fell during most of the week, slicing through the 1.48 level during that candle. That being the case, the market ended up finding a significant amount of support just below, and therefore we ended up forming a nice-looking candle that shaped just about perfectly as a hammer. If we break above the 1.50 level, the market should continue to go higher as this could end up being some type of supportive barrier that keeps the British pound afloat. If we do break above the 1.50 level we feel that the market should then go to the 1.55 handle.
On the other hand, if we break down below the bottom of the hammer for the week, that of course would be very negative and should send this market down to the 1.45 handle. This is a market that has been negative for some time, but the question then becomes whether or not we can continue to fall the way we have been doing over the last several months. That seems very unlikely, and now we are starting to wonder whether or not the market is finally finding its feet. If it does in this general vicinity, this could be the beginning of a trend reversal. However, we would not be willing to say that into we got well above the 1.55 handle.
Having said that, it might be a short-term buying opportunity that forms, and then a longer-term selling opportunity. We will have to wait to see what happens, but right now we recognize that it’s very likely that the markets will remain volatile in general. Volatility is going to make things difficult in general for longer-term traders, but we do at least have some type of parameters to follow for the longer-term trades. In the meantime though, on a break above the 1.50 level we would be buyers. On the other hand, we break down below the bottom of the hammer, we believe this market will then head to the 1.45 handle. Keep in mind though, it is not actually a trend change in our opinion until we are above the 1.55 handle.
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GBP/USD weekly outlook: April 6 - 10
The dollar fell against the pound on Friday after an unexpectedly weak U.S. nonfarm payrolls report reduced market expectations for a midyear rate hike by the Federal Reserve.
GBP/USD hit highs of 1.4945 immediately following the release of the data and was last up 0.62% at 1.4919.
The Labor Department reported that the U.S. economy added 126,000 new jobs in March, less than half of February’s gain and the smallest increase since December 2013. Economists had forecast jobs growth of 245,000 last month.
February’s figure was revised down to 264,000 from 295,000. The unemployment rate remained unchanged at a six-and-a-half year lows of 5.5%, in line with forecasts.
The surprisingly weak report added to concerns over the outlook for economic growth after other recent economic data pointed to a slowdown at the start of the year.
A slowing labor market could prompt the Fed to delay a planned increase in interest rates. Last month the Fed indicated that the first rate increase could come as soon as June, but added that continued improvement in labor markets would be a key factor it would consider.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies fell 0.95% to 96.84. The index ended the week down 0.74%, its third straight weekly decline.
The drop in the dollar was exacerbated by thin trading conditions due to the Easter holiday weekend. Most markets in Europe were closed and U.S markets traded for shortened hours.
In the week ahead, markets outside the U.S. will remain closed on Monday. The U.S. is to release what will be closely watched data on service sector activity on Monday and the Federal Reserve is to publish the minutes of its March meeting on Wednesday.
Tuesday’s report on U.K. services sector growth and Thursday’s rate announcement by the Bank of England will also be in focus.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
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GBP/USD Forecast Apr. 6-10
The British pound showed little change last week, as GBP/USD closed at the 1.49 line. This week’s highlights are Services PMI and Manufacturing Production. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.
British PMIs were mixed last week, while Current Account fell short of expectations. In the US, the week started with strong numbers, led by an excellent consumer confidence report and strong unemployment claims. However, the week ended with a very disappointing jobs report, raising speculation that the Fed may have to delay a rate hike.
* All times are GMT
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GBP/USD: Trading the British Services PMI
The British Services PMI (Purchasing Managers’ Index) is based on a survey of purchasing managers in the services sector. A reading which is higher than the market forecast is bullish for the pound.
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Tuesday at 9:30 GMT.
Indicator Background
Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of future economic trends.
Services PMI continues to trade well above the 50-point level, indicative of steady expansion in the services sector. The index came in at 56.7 points in February, shy of the forecast of 57.6 points. The estimate for the March report stands at 57.1 points.
Sentiments and levels
Despite a dismal job report out of the US late last week, the dollar managed to hold its own against the pound. This demonstrates that dollar sentiment remains strong against its major rivals, including the pound. If US releases bounce back this week, we could see the pound lose ground. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.5296, 1.5114, 1.5008, 1.4813, 1.4621 and 1.4521.
5 Scenarios
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U.K. services PMI rises to 7-month high of 58.9 in March
U.K. service sector activity expanded at the fastest rate in seven months in March, fuelling optimism over the health of the economy, industry data showed on Tuesday.
In a report, market research group Markit said the seasonally adjusted Markit/CIPS Services Purchasing Managers Index increased to 58.9 last month from a reading of 56.7 in February. Analysts had expected the index to rise to 57.0 in March.
On the index, a level above 50.0 indicates expansion in the industry, below 50.0 indicates contraction.
Growth in activity was attributed by survey respondents to a wider economic recovery, improving confidence, winning new customers and new product development.
Commenting on the report, Chris Williamson, Chief Economist at survey compilers Markit said, “The three PMI surveys collectively indicate that the economy grew by 0.7% in the first quarter, reviving from the slowdown seen late last year."
GBP/USD was trading at 1.4876 from around 1.4900 ahead of the release of the data, while EUR/GBP was at 0.7298 from 0.7292 earlier.
Meanwhile, European stock markets remained higher. London’s FTSE 100 rose 1.15%, the EURO STOXX 50 climbed 1.05%, France's CAC 40 advanced 1.2%, while Germany's DAX rallied 1%.
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GBP/USD: Cable Heads Toward $1.49, Investors Confused
The pound jumped from $1.48 and was trading at $1.4880 on Wednesday, around 0.5% higher on the day. Investors are still confused by last Friday's dismal payrolls, although the US dollar is now trading higher than before the actual release.
US non-farm payrolls rose just 126,000, below market estimates of 245,000 and lower than last month's revised 264,000. The unemployment rate stayed at 5.5%, while average hourly earnings rose 0.3% on a monthly basis and rose 2.1% on a yearly basis.
Moreover, the latest UK services PMI came out at 58.9, beating analysts expectations of 57.0 and ticking higher from last month's 56.7, Markit informed traders on Tuesday. Sterling failed to react to this news and was dragged by dollar's strength on Tuesday, but managed to recover and was rising on Wednesday.
The outlook remains neutral as bulls are very active at $1.48 and are buying dips, but cable can't breach the $1.50 resistance, meaning the pound is trading in a tight range.
Furthermore, the FOMC minutes are due later in the session, which might offer some insight into last Federal Reserve meeting, which was taken as dovish by market participants.
As there are no news on the agenda from the UK, trading will be driven mainly by US fundamentals and the dollar's movement.
According to the CFTC and Rabobank's research: "after increasing for four consecutive weeks, GBP shorts edged marginally lower to 36,630 from 38,557 previously. While this is the least bearish stance since March 10, the upcoming general elections scheduled on May 7 pose a major risk to the pound, while Following the sharp fall to 71,227 from 79,726, USD longs increased modestly to 73,143 in the week ending March 31. This is still well below the year-to-date high at 81,270 set in the first week of March before positive bets on the USD were trimmed on the back of a far less hawkish and in fact dovish Fed."
Fed minutes may help USD extend recovery
"Recovery of front-end US yields provides some support for the USD, with the implied yield on the March 2016 euro-dollar future having regained about half of Friday’s 6bp decline. The release of the minutes to the March FOMC meeting today may provide a bit more support to the USD. Our economists note that most of the dovish elements of the March Fed meeting were associated with the accompanying Summary of Economic Projections, while the minutes themselves may focus more on the crafting of what was a relatively more hawkish statement," analysts at BNP Paribas wrote in a research note on Wednesday.
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BoE to Keep Watch Over Disinflationary Forces
The UK economy grew stronger last year than had been first estimated, and is expected to grow even faster this year. The labor market has been tightening sharply and the jobless rate is expected to continue falling towards 5% in the medium-term.
Still, the Bank of England (BoE) remains very cautious about lifting rates as both external and internal disinflationary pressures continue to persist. Despite the GDP output already moving above pre-crisis levels last year, significantly weak wages and poor labor market productivity keep domestically generated inflationary pressures markedly subdued.
At the March meeting of the BoE's Monetary Policy Committee (MPC), policymakers argued that the outlook for labor costs remained defined by two opposing forces. One was that a lower jobless rate could push up inflation in the medium term, but on the other hand, significantly weak inflation may turn into lower inflation expectations and those could lead to suppressed wage growth.
While the average weekly earnings, published by the Office for National Statistics (ONS), were rising between January 2003 and December 2008 at the average of 4.2%, the same measure of pay growth declined to the average increase of only 1.2% between January 2009 and the same month this year.
The latest set of commercial surveys indicate we should not expect any increase in earnings growth this year, while the latest official data showed recently that productivity growth in the UK labor market in the last seven years has been the weakest in the post-war period.
The effect of sterling's appreciation against the US dollar in the first half of 2014 has also added to the current downward price pressures. Policymakers have also raised their concerns about deflationary forces becoming more persistent also in the medium-term, driven by the risk that divergent monetary policy trends, as well as stronger prospects for growth in the UK than in the euro area, might continue to put upwards pressure on sterling's exchange rate, primarily versus the euro.
The core CPI inflation, the underlying price trend which excludes the volatile prices of energy, food and alcohol, also slowed more than estimated to 1.2% - the lowest level since December 2008 – while the overall CPI gauge fell to zero in February and is expected to drop even further into deflation either in March or April. The majority of deviation of inflation down from the 2% target has come from the effects of lower prices of energy and food in the last six months.
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