GBPUSD news - page 62
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UK retail sales growth unexpectedly quickens in August-CBI
British annual retail sales growth unexpectedly picked up pace this month, a survey by the Confederation of British Industry said on Wednesday.
The CBI distributive trades survey's retail sales balance rose in August to +24 from +21 in July and above economists' forecasts of +18.
Sales expectations for September were +35, up from +13 in August.
Official figures released this month showed British retail sales rose by less than expected in July, hit by a fall in the sales of auto fuels.
The Bank of England has said it is increasingly looking at domestic pressures as it gages when to raise interest rates, at a time when a rising sterling and falling oil prices, exacerbated by turmoil in China, are keeping British price pressures in check.
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GBP/USD: Sterling Consolidates Higher, Supported by Oil Rebound
The UK's pound added small gains on Thursday after the opening bell, consolidating somewhat after the US dollar rallied and sent cable below $1.55 in the previous session. The rebound in commodity prices, notably oil, provides some support to sterling.
Sterling added 0.19% to $1.5487, recovering somewhat after it fell from $1.57192 to $1.54517 in the previous session.
Crude oil prices' stabilization continues, rebounding from Monday's steep losses, although US crude futures still trade below $40 per barrel.
The US dollar strengthened across the board, following upbeat US durable goods orders for July, pointing to a solid start for business investment in Q3, supporting the US dollar.
New York Federal Reserve President William Dudley stated on Wednesday that recent developments made the case for a September hike "less compelling" than a few weeks ago.
"Certainly Dudley’s comments show that US policymakers have serious concerns about events in China and the potential ripple out effects, with some notable names calling for extra stimulus in the form of extra QE, Larry Summers, being one such advocate, which does seem somewhat of an overreaction," Michael Hewson from CMC Markets wrote on Thursday.
US data later today will remain in focus with the latest revision to Q2 GDP expected to be revised slightly higher as a result of recent upward revisions to June data, including yesterday’s durable goods. An upward revision to 3.2% from 2.3% is expected with most of that coming from the services sector. Personal consumption is also expected to nudge higher to 3.1%.
Sterling will remain sensitive to the Chinese stock performance as it influences commodity prices, which affects the UK's mining and energy sector in a big way.
Chinese stocks calmed somewhat on Wednesday and managed to finish higher on Thursday. China's benchmark Shanghai Composite rose 5% after heavy losses seen on Monday and Tuesday.
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UK GDP: Economy Keeps Pace Helped by Stronger Trade, Services
The UK economy grew at the rate of 0.7% between the first and second quarters, and rose 2.6% on a yearly basis. This was the tenth consecutive quarter of positive growth, the Office for National Statistics (ONS) informed on Friday.
GDP per head slipped 0.1% below the pre-crisis peak during the second quarter, while the overall economic growth already exceeded the level of its pre-downturn peak in the third quarter of 2013, and was 5.2% above that peak in the second quarter of this year.
Growth in the second quarter was primarily driven by a robust services sector, rising 0.7% and contributing to quarterly growth with 0.6 percentage points. Output in industry was revised down to 0.7%, with the manufacturing sector suffering a decline of 0.3%. The construction sector saw a healthy bounce-back as the output was revised up to 0.2%.
On the expenditure side, the largest upward pressure came surprisingly from net trade, which contributed to overall growth with 1%, the strongest since the first quarter of 2011. This rather strong upward push from the trade sector stems from rising exports during the second quarter, up 3.9%, while imports slowed to a rise of just 0.6%. The ONS's Katherine Kent said the main drivers were a rise in the exports of chemicals to the USA and the export of fuels.
Household consumption unexpectedly decelerated to a rise of 0.7% during the second quarter.
Business investment above estimates in Q2
In a separate release, the ONS said business investment was up by 2.9% in the second quarter compared with the previous quarter, driven by machinery equipment and intellectual property products. These drivers were partially offset by a fall in other buildings and structures. Data also showed that compared with the second quarter of 2014, business investment was up 5%, which is the lowest rise in two years.
The ONS figures also showed the Index of Services, which accounts for 78.4% of GDP, rose above estimates between May and June by 0.5% with increases in all main components; the highest being in transport, storage and communications which rose 1% when compared with April to May. On a quarter-on-quarter basis services rose 0.7%, unrevised from the previous estimate.
Outlook steady
In its latest economic forecast, released on Monday, the Confederation of British Industry (CBI) increased its GDP growth prediction for 2015 from 2.4% to 2.6% based on positive signs of rising productivity and the pace of wage growth.
John Cridland, CBI director general, said: "We’re encouraged by the twin engined-growth of household spending, spurred by stronger wage increases and low inflation, buttressed by business investment … We’re also seeing tentative signs of productivity picking up.
"But the outlook on exports is somewhat muted: the strong pound is hampering our competitiveness abroad and growth in the euro zone, our biggest trading partner, will remain subdued for the foreseeable future, particularly given renewed uncertainty."
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GBP/USD forecast for the week of August 31, 2015
The GBP/USD pair initially tried to rally during the course of the week, testing the 1.58 level. This is an area that has been resistive in the past, and then as a result the sellers of course were attracted to it. Because of that, we not only fell but fell hard. We ended up crashing through the 1.54 level during the course of the week, and more importantly through the bottom of the uptrend line that had been supporting this market for some time now. With this in mind, we believe that the volatility is about to increase in this marketplace, and you will have to trade it off of shorter-term charts.
GBP/USD Forecast Aug. 31-Sep. 4
It was a dismal week for GBP/USD, which plunged almost 300 points. The pair closed the week at 1.5384, its lowest weekly close since early June. This week’s highlights are the PMI reports. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.
The financial meltdown due to the Chinese stock market crash caused havoc in the currency markets as well, and the pound plummeted as panicky investors sought the safety of the US dollar. In the UK, GDP posted a gain of 0.7% and matched the forecast, but this wasn’t enough to stop the pound’s hemorrhaging.
* All times are GMT
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Carney: China Slowdown Unlikely to Change BoE Rate Path
The slowdown in China and the wider Asian markets, and the possibility of further disinflationary pressures being imported to the UK, could increase downside risks to the inflation outlook in Britain, Bank of England (BoE) Governor Mark Carney said on Saturday.
But Carney at the same time argued that the Asian volatility and economic deceleration in China should not, at least for now, have any significant material impact on the path of the BoE's interest rates.
"...To the extent to which lower Chinese demand for commodities imparts a positive terms of trade and real income shock on the UK economy, the MPC can look through the temporary disinflationary impact on headline inflation and concentrate on potentially more persistent effects through trade and financial channels," Carney told the audience at the Economic Policy Symposium hosted by the Federal Reserve Bank of Kansas City in Jackson Hole.
"In that regard, a potential further material slowing of growth in China and more broadly in non-Japan Asia, particularly if coupled with material and persistent exchange rate depreciation, could impart further imported disinflationary pressures over the policy horizon," the governor warned.
On the impact on the BoE's monetary policy path, Carney said "developments in China are unlikely to change the process of rate increases from limited and gradual to infinitesimal and inert."
The governor also reiterated that "the prospect of sustained momentum in the UK economy and the gradual firming of underling inflationary pressures will likely put the decision as to when to start the process of gradual monetary policy normalization into sharper relief around the turn of this year."
"To be clear, that opinion doesn’t prejudge any particular decision. But it does indicate that recent events do not yet, to my mind, merit changing the MPC’s strategy for returning inflation to target - a strategy that already reflects the balance of two large gross effects: namely domestic strength on the one hand and disinflationary forces from the combination of the exchange rate and global weakness on the other," Carney concluded.
The BoE's base interest rate has been stuck at the rock bottom level of 0.5% since March 2009, when policymakers lowered the rate to the minimum and began asset purchases, or QE, in order to spur demand after the 2008 financial credit crunch.
The BoE's nine-strong rate-setting committee saw in August the first split on rate vote since December last year. The majority of market participants expect the BoE to begin increasing the base rate in the first half of 2016.
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GBP/USD: The Hits Keep Coming For Shell-Shocked Bulls
Not quite a week ago, we noted that it may finally be “bears’ turn for a day in the sun” on GBP/USD, noting that the disappointing rally last Monday, followed by the big Dark Cloud Cover* candlestick pattern was an ill omen for the unit. Since that peak, GBP/USD has put in five consecutive lower closes, breaking below the widely-watched 50-, 100- and now 200-day averages in short order.
From a fundamental perspective, there is little in the way of an obvious catalyst. At the global central bank confab in Jackson Hole, Wyoming last week, Bank of England Governor struck a seemingly upbeat tone, arguing that downside global risks must be weighed against the strength of the UK economy. He noted that the UK’s direct exposure to China is “modest” but that further slowing in China “could impart further imported disinflationary pressures over the policy horizon.” In typical flowery British prose, he also argued that, “developments in China are unlikely to change the process of rate increases from limited and gradual to infinitesimal and inert.” In other words, the Bank of England still feels that it is on track to raise interest rates next year, perhaps even early in the year if the economy remains strong.
Based on the recent trade in GBP/USD, however, traders seem skeptical of the central bank’s intentions. As of writing, the unit is trading at a nearly 3-month low near the 1.5300 level, and if that psychological level of support gives way, more downside appears likely; after all, the RSI is not yet in oversold territory. A close here could open the door for a move down to the early June lows around 1.5200 or even the start of the previous bullish trend near 1.5100. That said, disappointing US data could take cable back above the 200-day MA, though a sustained rally back above 1.5500 seems unlikely at this point.
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U.K. construction PMI rises to 57.3, vs. expectations for 57.5
U.K. construction sector activity expanded at a slower rate than expected in August, dampening optimism over the health of the economy, industry data showed on Wednesday.
In a report, market research firm Markit and the Chartered Institute of Purchasing & Supply said that their U.K. construction purchasing managers' index inched up to a seasonally adjusted 57.3 last month from a reading of 57.1 in July. Economists had expected the index to improve to 57.5 in August.
On the index, a reading above 50.0 indicates expansion, below indicates contraction.
Commenting on the report, Tim Moore, senior economist at Markit and author the report, said, “U.K. construction companies remained on a reasonably strong growth footing in August, helped by a sustained recovery in both residential and commercial building activity."
GBP/USD was trading at 1.5295 from around 1.5298 ahead of the release of the data, while EUR/GBP was at 0.7376 from 0.7374 earlier.
Meanwhile, European stock markets were lower. London’s FTSE 100 shed 0.4%, the EURO STOXX 50 lost 0.35%, France's CAC 40 dipped 0.35%, while Germany's DAX inched down 0.3%.
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US Non-Farm employment change data for the month of August has been released today, which stood at 190,000 jobs as against 177,000 jobs last month. This economic event of US and UK's less than expected Construction PMI, has adversely impacted the Great Britain Pound today. The bears are riding over the currency pair and have dragged it below its 1.5300 level. Pound seems to be under pressure on the back of strengthening US Dollar and downbeat UK economic numbers. For the rest of the day trading, the due to be released Factory orders should also be considered and the investors should mark their movements wisely.
UK Services Arena Worsens to 27-Mth Low: Aug PMI
Activity in the UK services sector considerably soured in August, surprising on the downside, the industry survey showed on Thursday.
Markit Economic's services PMI came in at 55.6 points in the eighth month of the year, following the 57.4 seen previously. That's the lowest print since May 2013.
Market consensus had bet on a reading of 57.7.
Commenting on the report, Chris Williamson, chief economist at Markit, said that “even after allowing for usual seasonal influences, August saw an unexpectedly sharp slowing in the pace of economic growth. The services PMI came in well below even the most pessimistic of economists’ forecasts and follows disappointing news of a stagnation in the manufacturing sector earlier in the week."
Moreover, David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, stated that "the services sector left little to get excited about as the growth rate of new business was reported as the lowest for 28 months and the rate of overall activity growth the softest for 27 months. That said, services output has now risen for 32 consecutive months, and backlogs continued to rise."
Striving services
According to the latest official figures published last week, UK economic growth in the second quarter was primarily driven by services. This bounce-back comes after the sector's output slowed unexpectedly at the start of the year.
The Confederation of British Industries (CBI) informed on Friday last week that services firms across the UK had enjoyed a healthy pick up in activity in the quarter to August.
Both the volume and value of business activity within UK services sector expanded in the quarter to August, indicating this robust sector, which accounts for as much as 78% of the total economic output, is set to continue supporting the economy in the third quarter.
GDP growth
The economy in Britain grew at the rate of 0.7% between the first and second quarters, and rose 2.6% on a yearly basis. This was the tenth consecutive quarter of positive growth, according to the secodn official GDP estimate.
The UK economy should continue to stride forward rather confidently, pushed by robust services sector output, domestic consumption, and steady business investment. A secured and reformed banking sector, as well as easy monetary policy, should add to the stability outlook.
The Bank of England (BoE) expects a growth rate of 0.7% in both the second and third quarters of this year, consistent with the preliminary estimate of 0.6% in the third quarter. The BoE's nine-strong rate-setting committee saw in August the first split on rate vote since December last year. Majority of market participants expects the BoE to begin increasing the base rate in the first half of 2016.
In its latest outlook, NIESR said it expected UK GDP to slow down in the third quarter, but it still sees growth of 2.5% this year, and close to this rate throughout the forecast period. The CBI revised up its outlook for the UK economy to a rise of 2.6% this year, before accelerating further to 2.8% next year, driven primarily by rising business investments and productivity, and robust domestic demand.
Asian volatility
Chinese volatility spreading across the rest of the global markets is increasing the level of risk to the current outlooks.
Speaking in Jackson Hole last week, BoE Governor Mark Carney said that slowdown in China and the wider Asian markets, and the possibility of further disinflationary pressures being imported to the UK, could increase downside risks to the inflation outlook in Britain.
But Carney at the same time argued that the Asian volatility and economic deceleration in China should not, at least for now, have any significant material impact on the path of the BoE interest rates. More detailed sentiment is expected on September 10, when the BoE's rate-setters meet to decide on the monetary stance for September, and will also publish the MPC minutes the same day.
The BoE stroke a more dovish tone in itsAugust Inflation Report forecasts, when it revised down the near-term inflation outlook on the back of strong external downward pressures stemming from weak oil prices and sterling appreciation.
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