GBPUSD news - page 102
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The pound is diving
The British pound is tumbling after inflation rose less than expected.
The currency is down by 0.6% at 1.3258 against the dollar as of 7:31 a.m. ET.
Data from the Office for National Statistics showed that consumer prices in the UK rose only 0.6% year-over-year in August, below expectations of up 0.7%.
Meanwhile, PPI input rose by just 0.2%, below expectations of 0.6%.
Bank of England (BoE) Preview: Forward Guidance Crucial
There is a strong probability that the Bank of England Monetary Policy Committee MPC) will leave policy on hold on Thursday with the forward guidance and hints over November’s decision crucial for market direction.
The MPC is likely to maintain a relatively dovish stance, but be slightly more cautious over the potential for further rate cuts while insisting that it is ready to loosen monetary policy further if necessary with the use of a wider range of tools. Net risks suggest little value being short Sterling or long gilts into the decision.
After the aggressive easing in August, the latest MPC meeting will be taking stock of the situation with back-to-back rate cuts unlikely, especially given the data flow.
The timeline of the next few meetings is very important for policy, especially given the move to cut the number of meetings to 8 per year from 12 previously.
After this month’s meeting, the next will be on November 3rd followed by the final meeting of the year on December 15th. The bank will be very reluctant to change policy just ahead of the Christmas period in December and will also prefer to make changes when the latest inflation report is available.
The bank will, therefore see November’s meeting as the only realistic opportunity to adjust policy again this year.
Overall data releases have been generally encouraging over the past few weeks with a recovery in the PMI indices and evidence that consumer spending has held firm. There has also been evidence that hiring intentions have recovered slightly.
There will still be concerns over the EU referendum impact, notably on investment, but the bank should be more optimistic surrounding the near-term growth outlook. Importantly, in August, the bank still saw more potential easing even with an improvement in economic data.
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BOE MPC Minutes: MPC expects less of a slowdown in UK GDP in H2 2016
Minutes from the Bank of England MPC meeting now out 15 Sept
GDP vs inflation expectations at loggerheads and that helps leave GBPUSD largely unchanged at 1.3232 having had a quick look at 1.3200 again.
The Minutes reflect the current mood I highlighted in my preview.. Some optimism/relief vs caution on test/uncertainty ahead. Leaving options open but still leaning toward another cut.
GBP/USD Trading Lower, Support Test Likely
GBP/USD is 0.52% lower in today’s trading, with the modest gain posted over the preceding two sessions largely erased. A follow through decline to the week’s 1.3137 low now appears likely. The Bank of England left rates on hold yesterday. In addition, minutes showed that members acknowledge that the economy has fared slightly better than anticipated since the EU referendum.
However, sterling failed to carve out a clear direction following the policy statement and after a heavy release of U.S. economic data, which overall disappointed and lowered expectations of a rate hike in the U.S. during next week’s FOMC meeting. However, traders still appear convinced the BoE will cut rates in November and sellers have taken control in today’s session.
On the downside, below the 1.3137 first support, which represents a 50% retracement of the advance from the August low, the next support is at the late August corrective bottom at 1.3060, representing a 61.8% retracement of the rally. A drop below this level would leave the target at the July/August lows.
Near term resistance for the pair is at Thursday’s 1.3279 high. However, given the tumble currently underway in the pair and the break of the 50-day moving average that now appears to be taking place, a rebound to resistance currently appears unlikely and GBP/USD will likely head into next week’s trading with a downside bias. A failure to react to the developing oversold condition would be a sign of internal weakness, further supporting a downside bias in the pair.
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GBP/USD forecast for the week of September 19, 2016
The GBP/USD pair initially tried to rally during the week but turned right back around to form a negative candle. It appears that we are going to continue to see some type of consolidation between the 1.35 level above, and the 1.2850 level on the bottom. Now that the volume is starting to pick up after the summer break, I believe that the market is eventually going to break down and reach towards the 1.25 handle. Ultimately, I believe that rallies will continue to be selling opportunities on signs of exhaustion again and again.
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GBP/USD Weekly Outlook September 19-23
GBP/USD posted large losses in the prior week, as a stronger US Dollar and a confirmation of a further rate cut from the BoE weighed on the currency pair. The pair was seen turning lower after posting a high on September 6 and is seen approaching lows from a range set shortly after the EU referendum.
The currency pair posted a strong decline on Tuesday, as the US Dollar was seen moving higher, while volatility slowed around the BoE meeting. A more optimistic tone was seen during the Bank of England meeting, with a unanimous vote for all policy actions, including keeping rates unchanged at the meeting, as the recovery following the UK vote was seen as stronger than expected. While the economy showed improvements as compared to the August projections, MPC members still felt that a further rate cut would be warranted. Upcoming data will be closely watched, and further improvements in the economy may see the central bank avoid cutting the interest rates further, but the rhetoric from the central bank meeting has left the British Pound trading heavy, especially during periods of US Dollar strength.
Friday’s inflation data out of the United States triggered broad-based strength in the US Dollar, and the British Pound was seen giving up the most losses among the majors on the day. CPI rose in both the monthly and annual figures, as well as the core figures, triggering a sharp jump higher in the Greenback. GBP/USD fell sharply following the news, ending the day with a staggering loss of 1.82%. Friday’s decline, as well as the weekly print for the currency pair, has set a bearish tone for the upcoming week, as the pair nears summer range lows ahead of the FOMC meeting.
The Federal Reserve is scheduled to deliver their monetary policy statement, rate announcement, economic projections, as well as a press conference on Wednesday. The meeting will introduce volatility into the US Dollar and across all the majors. There is some expectation for the Fed to show optimism towards a near-term rate hike, as comments from Fed members as well as Jannet Yellen’s speech in late August indicated that the central bank is nearing their targetted mandate. The futures markets are now indicating a 55% chance of a rate hike by the end of the year, while the probabilities hover around highs seen since the UK vote, there remains further upside potential in the event of a hawkish Fed in the upcoming week.
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Pressure on the pound increases as GBPUSD gives up 1.3000
It's been under the cosh all morning and now sinking further
Cable has finally cleared the recent support at 1.2995-1.300 and triggered stops to the next level I mentioned around the 17 Aug iows of 1.2979.
Strong demand/bids between 1.2940-50 the next target on the down side with 1.3000 expected to cap rallies for the moment.
EURGBP still a prime mover as is GBPJPY and I'd guess that a few funds might be using short GBPJPY as a disappointing BOJ play.
UK Government Borrowing Falls 13% In First Five Months Of 2016/17
The UK August public sector net borrowing requirement (excluding public-sector banks) fell to £10.5bn from £11.4bn in August 2015 and was a marginally higher than expected deficit for the month.
For the first five months of 2016/17, the borrowing requirement fell 13% to £33.8bn from £38.7bn the previous year. Over the same period, the central government cash requirement fell to £19.4bn from £26.5bn the previous year. The data will offer near-term relief over trends, but longer-term unease will continue.
The central government net cash requirement fell to £22.2bn from £27.3bn previously. Total net debt amounted to 83.6% of GDP, unchanged from the previous year.
Overall receipts held firm with an annual increase of 4.4% for the first five months of the year with solid increases across most components and a 7.8% increase in National Insurance contributions. Spending remained under control with a 1.3% annual increase, although for August alone, there was an annual spending increase of 5.1%.
There will be relief that revenue has held firm in the first two months of data following the EU referendum vote, although trends will continue to be monitored closely.
Spending commitments are liable to increase further in the short term and there is a strong probability that spending on infrastructure will be increased in the Autumn Budget Statement, which is due on November 23rd.
The overall budget deficit is still running at close to 4% of GDP and is liable to widen again as spending increases. A deficit on this scale will lessen the scope for sustained fiscal expansion to support the economy and also increases the risk of a sudden loss of international confidence in the fundamentals, especially if there is any evidence of weaker growth.
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UK gross mortgage lending +15.0% y/y in August
Latest numbers from the Council of Mortgage Lenders
CML's senior economist Mohammad Jamei says;
"Widely voiced fears in recent months about the housing market have proved to be wide of the mark. Prospects for house purchase activity post-referendum look slightly subdued, when compared to late 2015 and early 2016. However, sentiment in the market recovered in August. This is reflected in stronger-than-expected transaction figures, and in our gross lending estimate.
It was warned that house prices would take a tumble after the Brexit vote but what we've seen so far has been marginal. The Brexit situation hits two different demographics, normal folks who live here and foreigners who use UK property for investment purposes. Brexit means more to those foreign investors in the short term than it does your average Brit. Investors are also largely putting their money into the high end and commercial parts of the property market.This recovery in sentiment is likely to be down to a number of different factors, including the Bank of England's monetary stimulus and its introduction of the Term Funding Scheme in August. A subsequent uptick in approvals is anticipated, albeit still at levels lower than earlier this year as affordability constraints and lack of properties on the market for sale continue to bear down on borrowers. The Bank also continues to indicate another rate cut on the cards, if medium term prospects remain unchanged."
GBP/USD Fails to Maintain Resistance Break
GBP/USD is lower in today’s trading, off 0.49% at the 1.3010 level. The recent move higher in the pair had broken above first resistance at the late August corrective bottom, but the move above this level has failed, keeping the bias to the downside.
The advance in yesterday’s trading failed ahead of the falling trendline shown on the daily chart, which is reinforced by the 50-day moving average. The inability to move above these converging resistance levels is a sign of weakness and the next move expected in the pair is a retest of this week’s low at 1.2947. A drop below this level would bring key support into play at the 1.2866/1.2798 zone.
GBP/USD is now oversold on an intraday basis as well as a daily basis. In addition, support is in play on the hourly chart at the 1.300 level. Thus, stabilization or another attempt at a move higher could play out over the short term.
Resistance is at yesterday’s 1.3121 high, a move to which would bring the falling resistance line back into play. At present, any near term strength is not expected to result in a move above these resistance levels and rallies still appear best used as opportunities to sell GBP/USD.
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