GBPUSD news - page 67
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U.K. Industrial Output Growth Exceeds Expectations
U.K. industrial output rebounded at a faster-than-expected pace in August, driven by oil extraction and transport equipment.
Industrial production grew 1 percent from July, reversing a 0.3 percent drop in the prior month, data from the Office for National Statistics showed Wednesday.
A similar rate of strong growth was last seen in February 2014. Economists had forecast only a 0.3 percent rise for August.
At the same time, manufacturing advanced 0.5 percent in August, partially offsetting a 0.7 percent fall in July. It was also faster than the expected 0.3 percent increase.
The latest monthly growth indicates effect of some earlier than usual shutdowns in the previous month.
Output of oil and gas extraction surged 8.7 percent and that of transport equipment climbed 4.6 percent.
On a yearly basis, industrial output growth accelerated to 1.9 percent in August from 0.7 percent in July. This was the fastest expansion since April 2014, when it climbed 2.4 percent, and also better than the 1.2 percent increase forecast by economists.
Meanwhile, manufacturing output continued to decline in August, largely due to a fall in machinery and equipment output.
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GBP/USD: Pound Tops $1.53, Lending Ear to BoE Rate Setters
Sterling added a another hefty chunk to the gains seen since the turn of the month on Wednesday, with some upbeat industrial numbers offering a solid reason to buy, in the run up to the October Bank of England policy gathering.
The UK pound added 0.60% to buy $1.5315, notching its highest level against the greenback in two weeks, as well as its fourth advance in the past five trading sessions.
Markets do not anticipate the Monetary Policy Committee to make any changes to the policy setting on Thursday with the balance between the doves and the single hawk also likely to remain preserved.
Yet, the BoE has caught up with the Federal Reserve when it comes to expectations about which central bank will be the first to make the initial post-recession increase in short-term interest rates.
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Will GBP/USD Rise Another 500 Pips?
The biggest story in the FX market Wednesday was the bottom in GBP/USD. Over the past 48 hours, sterling rose strongly against the greenback and the latest move has taken the currency pair above its 9-day-long consolidation range. After selling off 550 pips from high to low in mid September, the British pound is in the midst of what could be a very significant turn for the currency. In fact, this year every single major reversal in GBP/USD has been a minimum of 500 pips and the sample size of 11 big moves is not small. This suggests that from the bottom of 1.5110, GBP/USD could rise as high as 1.5610. The latest rally in sterling was driven by better-than-expected data and Anheuser-Busch Inbev's (NYSE:BUD) bid for U.K.'s SABMiller (LONDON:SAB). Industrial production rose 3 times more than expected in August, which was a breath of fresh air after back-to-back data disappointments. At $104 billion, the brew maker deal is large but the impact of M&A transactions on the forex market fade quickly and in this case, it is still not clear if a deal will be made as SAB quickly rejected the higher bid proposal.
The sustainability of the GBP/USD rally hinges not on M&A news but on Thursday's Bank of England meeting. The central bank is widely expected to leave policy unchanged but with the minutes now released alongside the monetary policy decision, the number of dissenters and the overall tone will have a significant impact on the currency. Since the last meeting, we have seen a lot more weakness than strength in the U.K. economy. The only bright spot is the labor market and wage growth. Thankfully employment is critical to the outlook for the U.K. economy and wage growth is one of the most important considerations for monetary policy. Wages rose strongly in July and with the unemployment rate falling, earnings could accelerate through the rest of the year. The Bank of England is in no position to raise interest rates and there is no scenario where they would act before the Federal Reserve. But if they sound comfortable with the outlook for the economy, GBP/USD could extend its gains, which would be just the blessing it needs to hit 1.55.
The New Zealand dollar was the best performing currency of the day. In the short span of 7 trading days, NZD/USD has risen from 63 cents to 66 cents. No economic reports were released overnight but NZD is still riding on Tuesday's Global Dairy Trade auction high. Milk prices increased for the fourth auction in a row, solidifying expectations that dairy prices have bottomed. As New Zealand's most important export, this recovery cuts the need for further easing from the Reserve Bank of New Zealand because the drop in prices was the primary motivation for their decision to lower rates 3 months in a row between June and September. If prices continue to stabilize, the RBNZ will be done for the year. Resistance in NZD/USD is at 67 cents and we believe that the rally could extend to that level but further gains may be difficult.
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BOE Preview: MPC hawks to have their wings clipped still
The latest in our series of previews focusses on today's BOE MPC interest rate decision and Minutes due at 11.00 GMT
To start with the obvious we can safely assume that interest rates will remain on hold yet again, but it's the voting that will have most impact along with the small print
Are there any more hawks likely to be revealing their Autumn plumage or are they firmly tucked up for Winter now ?
My thought is the latter as I see nothing in recent data to justify any more of a bullish tone to the Minutes than we've seen of late. Ok, so yesterday's industrial/mftg production data was welcome but not without its back story and the Sept services PMI reading of 53.3 vs 55.6 prev will inject an added note of caution.
Latest inflation data remains soft as expected by Carney but surely even he will be thinking that his previously bullish year-end forecasts are a bit hard to justify for the moment amidst soft commodity prices globally.
Throw the lack of US Fed decision to hike into the mix and I remain in the camp that errs on the side of caution.
Ok, so wages growth is encouraging but employment improvement is stalling/weaker again and that should filter through soon enough.
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GBP/USD: Sterling Trades in Narrow Range Ahead of BoE
Following a choppy overnight session, sterling traded virtually flat on Thursday ahead of the Bank of England (BoE) rate decision, although it remains at it highest since September 23.
Given the very low rates of inflation, the BoE will almost certainly keep monetary policy unchanged at 0.5% in October. The meeting minutes, which under the new format are released simultaneously, are expected to show that the Monetary Policy Committee, with the exception of one member (most probably Ian McCafferty), voted for a 25 basis-point rate hike, the same as August and September.
"There’s an outside chance that the recent jump in UK wage growth could compel Martin Weale to join Ian McCafferty in voting for a rate rise," Jasper Lawler from CMC Markets commented in his research note on Thursday.
Sterling was seen 0.06% higher at $1.5326 on Thursday, staying above the $1.53 handle after the previous session's jump after UK data confirmed a rebound in the manufacturing sector.
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Bank of England MPC votes 1-8 to hike rates vs 1-8 exp
Decision from the October 2015 Bank of England MPC monetary policy meeting 8 October 2015
GBP/USD: Extreme Overbought But One More Leg Higher - UOB
The recent GBP/USD rally is near extreme overbought level and while another leg higher towards 1.5390 cannot be ruled out, a sustained move above this level appears unlikely at this stage, says UOB Group.
"While the pressure is still clearly on the upside, GBP has to clear the major 1.5390 resistance before a sustained upmove can be expected in the next few weeks.
On the downside, a move below 1.5260 would indicate that the upward pressure has eased," UOB argues.
GBP/USD forecast for the week of October 12, 2015
The GBP/USD pair initially dipped during the course of the week, but found the 1.52 level to be supportive enough to turn the market back around. Ultimately though, this is a market that looks like it is going to consolidate between the 1.52 level and the 1.55 level above, meaning that longer-term traders will probably struggle at this point in time. If we did break down below the bottom of the hammer from the previous week, at that point in time we think that the market could be sold.
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GBP/USD: Wave-IV Consolidation Before Another Push Higher – Nomura
The pound managed to defy dovish meeting minutes and gain some ground against the dollar.
The team at Nomura examines the charts and sees the next moves:
Here is their view, courtesy of eFXnews:
GNP/USD has resolved a bullish rounded bottom pattern, notes Nomura.
“Although projection targets have already been met, we expect a continuation higher both in the near and medium term because of the impulsive nature of this rally.
From a wave perspective, waves-1 through 3 of an initial 5-wave move are in place and now a 4th wave consolidation is expected to form; a choppy triangle would be ideal. Once the range is complete another rally towards 1.5450 can mark wave-5 in the first leg of this new uptrend,” Nomura projects.
UK to Flirt With Deflation Again as Demand Cools
Consumer price inflation is expected to remain very close to zero or even slip back into deflation again in September, as significant external disinflationary forces continue to weigh on consumer price growth in the UK.
Nearly three quarters of the downward deviation from the official inflation target of 2% comes from external sources such as cheaper energy and imports. This has been partly due to stronger sterling and depreciating emerging market currencies.
Oil prices continued to fall significantly over the year to September, with Brent crude prices falling as much as 45% when compared with the same month a year ago. Petrol prices also continued to decline as the official figures showed no revival in demand for the fuel, according to the AA Fuel Report.
The British Retail Consortium (BRC) reported earlier this week that the annual rate of UK shop prices growth had declined deeper below zero by 1.9% in September, down from deflation of 1.4% a month before. The BRC said food prices slipped back into deflation by 0.5% in September, after rising 0.2% in August, while non-food price deflation accelerated to 2.9% from 2.4%.
"September saw significant prices drops in both food and non-food goods marking the 29th consecutive month of falling shop prices. The temporary fluctuation of annual food price rises has come to an end with food returning to deflationary territory," BRC director general Helen Dickinson commented on the September figures.
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