GBPUSD news - page 108
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GBP/USD Gaining Ground in Today’s Session
GBP/USD reversed from Monday’s lows and recovered to end Monday’s N.Y. session at 1.2239. The pair is following through to the upside today, currently trading at 1.2249, up 0.08%.
With overbought conditions not yet a factor and upside momentum intact, it appears the path of least resistance over the short term is to the upside with a potential test of first resistance at 1.2333 playing out in today’s session.
A sustained break above first resistance would confirm a breakout from the consolidation phase that has been intact since GBP/USD established the October corrective bottom. Measuring the height of the pattern and projecting that distance from the breakout point would leave the upside target for the next move higher in the pair at 1.2583.
On the downside, first support for GBP/USD is at the October 11th 1.2089 low, which was reinforced with last week’s decline to 1.2083 and subsequent rebound. On a drop below this zone, the target becomes the low of the October 7th flash crash at 1.1950.
Several high impact data events are on the U.K. calendar this week, including Manufacturing PMI,due out later today, and the Bank of England’s latest monetary policy decision, which will take place on Thursday. This is the next episode in the so called super Thursdays. There will be an announcement on interest rates, the asset-purchase program and any other measures that the bank wants to take. The minutes of the meeting will be released and the bank will also publish its latest inflation report. In addition, Bank Governor Carney will hold a press conference following the inflation report presentation. Carney confirmed on Monday that he will stay in office until June 2019.
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UK BRC Shop Price Index for October: -1.7% y/y (September was -1.8%)
The British Retail Consortium Shop Price Index measures price changes in the retail outlets
October 2016 UK Markit CIPS construction PMI 52.6 vs 51.8 exp
Details from the October 2016 UK Markit/CIPS construction PMI data report 2 November 2016
Forecasts for British Pound v Euro & Dollar Following Bank of England Rally
Pound Sterling hit its best levels against a number of G10 currencies after the Bank of England votes unanimously to keep interest rates unchanged and upgrade their growth forecasts.
Pound Sterling charged higher as soon as the news was announced that the Bank of England's Monetary Policy Committee had voted unanimously to keep interest rates unchanged at 0.25%.
There were some expectations for a split in the vote and the outcome betrays a Bank whose next move may actually be to raise interest rates.
This is positive for the Pound as it hints at greater capital inflows into the UK from foreign investors seeking yield.
Also helping Sterling was the upgrade to growth forecasts in the Inflation Report.
Raising its growth forecast for 2017 to 1.4% from 0.8% makes this a record upward revision to a growth forecast.
The Bank of England conceded a massive miss on their previous GDP forecasts owing to them being too pessimistic on the outlook for the UK economy following the Brexit vote.
Of note, the consumer confidence of the UK consumer surprised the Bank as, “households look entirely through Brexit uncertainty.”
Governor Carney says business investment has been better than the Bank had initially forecast.
Inflation forecasts are lifted to 2.75 from 2% in 2017 and to 2.7% from 2.4% in 2018 thanks almost exclusively to the fall in value of Sterling.
The fall in Sterling will have more significant implications for monetary policy as it raises inflation forecasts over the next three years.
With inflation clearly heading above the mandated 2% we could expect an interest rate rise in coming years, but not too soon as Carney says the impact of the weaker exchange rate should be temporary in nature.
The irony though is that because Carney speaks about higher inflation so the Pound rises. This in turn lowers prospects for inflation down the road, the question is how much further can Sterling recover?
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GBP/USD forecast for the week of November 7, 2016
The British pound rose during this past week, as we continue to see quite a bit of bullish pressure. Having said that, I expect the 1.2850 level above to be massively resistive and could bring in quite a bit of selling pressure. I’m waiting to see if we get an exhaustive candle in that area, because even though this has been a very bullish candle, the downtrend is still very strong and as a result patience will be needed in order to form a selling position that goes in line with the longer-term trend.
UK businesses report stronger activity in three months to October: CBI
British businesses reported stronger activity in the three months to October after an initial slowdown following June's vote to leave the European Union, the Confederation of British Industry said on Sunday.
The CBI said its monthly growth indicator - which is based on surveys of how companies' output has changed over the previous three months - rose to +8 in October from a six-month low of +3 in September.
"Manufacturing exports are riding high on the back of weaker sterling and consumers are continuing to spend on the high street, but activity is more modest in the services sector," CBI chief economist Rain Newton-Smith said.
However the CBI said there were likely to be tougher times ahead, as uncertainty about the terms on which Britain would leave the EU had led to a "sharp deterioration" in planned investment.
"Although growth will be robust for the remainder of this year, we expect uncertainty ... to dampen business investment in 2017, along with a rise in inflation which will knock household spending," Newton-Smith said.
The forward-looking component of the CBI growth survey fell to +13 in October from a one-year high of +22 in September, though this was still above its long-run average.
UK manufacturers growing wary of investment in wake of Brexit vote
Data from the EEF (formerly the Engineering Employers' Federation) reported in the UK Telegraph over the weekend:
September 2016 UK industrial production -0.4% vs 0.0% exp m/m
Details from the September 2016 UK industrial and manufacturing production data report 8 November 2016
Pretty much a repeat of last month were we saw manufacturing coming in slightly better.
UK data - RICS House Price Balance for October at +23 (expected +19)
UK house prices rise at fastest since April
GBP/USD Moves to New Rally High
GBP/USD has broken out to the upside of what had become a newly established trading range between the November 4th high at 1.2557 and the former highs established in October at 1.2333. At present, the pair is trading at 1.2634, up 0.65% from Thursday’s N.Y. close.
GBP/USD moved more than 1% higher in Thursday’s trading, as Sterling has benefited in the wake of Donald Trump’s U.S. Presidential victory, given expectations for higher inflation.
With today’s breakout above resistance, the target move for GBP/USD are the lows established in July at 1.2798 and mid-August at 1.2866. A sustained breakout above this zone of resistance is required to suggest GBP/USD has established an important bottom and has further room to move on the upside throughout the rest of the year.
Overbought conditions are now a factor and the ability to move higher in the presence of the overextended condition is a sign of strength. Support on a near term pullback is at the upper boundary of the former range at 1.2557. Maintaining above this level would keep the bias in the pair firmly bullish heading into next week.
On today’s U.S. economic calendar, University of Michigan Consumer Sentiment will be released at 10:00am ET. Consensus estimate for the preliminary November reading is for an increase to 89.5 from the final October reading at 87.2. The dollar is currently down 0.07% at 98.80, reacting with a modest pullback to a test of key resistance and a fully overbought condition. Resilience in the dollar, however, is not yet having an impact on the rise in GBP/USD.
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