GBPUSD news - page 8
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GBP/USD edges up but upside seen limited
The pound edged up against the U.S. dollar on Monday, but still remained within close distance of a one-and-a-half month low as demand for sterling remained under pressure after data showed that activity in the U.K. construction sector slowed in July.
GBP/USD hit 1.6844 during U.S. morning trade, the session high; the pair subsequently consolidated at 1.6838, adding 0.10%.
Cable was likely to find support at 1.6790, the low of June 12 and resistance at 1.6891, the high of August 1.
The U.K. construction purchasing managers’ index slowed to 62.4 from 62.6 in June, but was still slightly ahead of expectations for a reading of 62.0.
The overall pace of growth was the fastest since 2007, with housing activity still by far the best performing construction category. Last month’s increase in output was the sharpest for over a decade.
Sharp increases in overall construction activity also led to a new survey-record pace of job creation in the sector last month.
Meanwhile, demand for the dollar remained supported despite data on Friday showing that U.S. jobs growth slowed in July.
The U.S. economy added 209,000 jobs last month, below forecasts for jobs growth of 233,000.
Although it was the sixth successive month that the U.S. economy added more than 200,000 jobs, the unemployment rate unexpectedly ticked up to 6.2% from 6.1% in June. In addition, wage growth was flat, pointing to underlying slack in the economy.
The data prompted investors to trim back expectations on the timing of a possible rate hike by the Federal Reserve.
Sterling was higher against the euro, with EUR/GBP edging down 0.17% to 0.7970.
Also Monday, official data showed that the number of unemployed people in Spain dropped by 29,800 last month, compared to expectations for a decline of 116,300. In June, the number of unemployed people in Spain declined by 122,700.
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U.K. services PMI rises to 8-month high of 59.1 in July
Service sector activity in the U.K. expanded at the fastest pace in eight months in July, fuelling optimism over the country’s economic outlook, industry data showed on Tuesday.
In a report, market research group Markit said the seasonally adjusted Markit/CIPS Services Purchasing Managers Index rose to 59.1 last month from a reading of 57.7 in June. Analysts had expected the index to inch up to 57.9 in July.
On the index, a level above 50.0 indicates expansion in the industry, below 50.0 indicates contraction.
Commenting on the report, Chris Williamson, Chief Economist at survey compilers Markit said, “The buoyancy of the services and construction sector PMIs suggest the domestic economy clearly continued to boom in July, offsetting the cooling of growth seen in the manufacturing sector.”
“We would expect to see GDP rise by 0.8% again if the surveys hold their current levels,” he added.
Following the release of that data, the pound turned higher against the U.S. dollar, with GBP/USD rising 0.13% to trade at 1.6884, compared to 1.6850 ahead of the data.
Meanwhile, European stock markets remained higher. London’s FTSE 100 tacked on 0.5%, the DJ Euro Stoxx 50 rose 0.65%, France's CAC 40 advanced 0.8%, while Germany's DAX added 0.8%.
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Moody's Cuts Outlook On U.K. Banking System
Moody's Investors Service on Tuesday lowered the outlook for the U.K. banking system to 'negative' from 'stable' after the new regulation prevent the use of taxpayer funds to support the failed banks.
The key driver for the latest action was that the government is now able to finalize the legislation to implement the structural reforms relating to the UK resolution and bail-in regime and the related ring-fencing framework, said Carlos Suarez Duarte, a Moody's Vice President - Senior Analyst and author of the report.
In addition, banks will be exposed to both conduct and litigation charges, which might constrain profitability and erode capital for some banks.
The negative outlook on the system is consistent with the negative outlooks on the six largest rated UK institutions, which account for 93.6 percent of active current accounts.
Meanwhile, improved credit fundamentals of most UK banks, mainly asset quality, earnings and capital, put them in a stronger position to withstand unexpected shocks, it said.
U.K. manufacturing production rises 0.3% in June
Manufacturing production in the U.K. rose less than expected in June, while industrial output also came in below forecasts, official data showed on Wednesday.
In a report, the U.K. Office for National Statistics said that manufacturing production inched up by a seasonally adjusted 0.3% in June, disappointing expectations for a gain of 0.6%. Manufacturing production in May dropped by 1.3%.
On an annualized basis, manufacturing production rose at rate of 1.9% in June, below forecasts for a 2.1% increase, after rising at a rate of 3.7% in the preceding month.
The report also showed that industrial production rose by a seasonally adjusted 0.3% in June, compared to expectations for a 0.6% gain, after falling 0.6% in May.
Following the release of the data, the pound added to losses against the U.S. dollar, with GBP/USD shedding 0.28% to trade at 1.6839, compared to 1.6856 ahead of the report.
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Pound Slides Toward Lowest in Eight Weeks After Data Disappoint
The pound slid toward the lowest level in eight weeks versus the dollar and yields on Britain’s government bonds dropped to a one-year low on concern the U.K.’s economy is falling short of analysts’ expectations.
Sterling weakened against all but two of its 16 major counterparts as data showed Britain’s shop prices dropped the most on record last month. Industrial output also climbed less than economists forecast in June, according to a separate report. A gauge of inflation expectations for the next decade declined to the lowest level since January 2013. Political leaders held a televised debate yesterday in advance of Scotland’s Sept. 18 referendum on independence.
“We have become much more conscious of the risks for the pound,” said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London. “Partly around the fact that the data is softening slightly and also around Scotland’s referendum.”
The pound fell 0.3 percent to $1.6831 at 4:21 p.m. London time after touching $1.6822. The U.K. currency dropped to $1.6814 on Aug. 4, matching the lowest level since June 12. Sterling was little changed at 79.33 pence per euro.
A close below $1.6820 may “trigger some more downward momentum,” BNP Paribas’ Sneyd said. “Long sterling is the most-crowded position” among Group-of-10 nations, he said, referring to bets the pound will rise. “That does make sterling quite vulnerable to negative data surprises.”
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Bank of England likely to hold interest rates at 0.5%, say economists
Poll of experts believes at least one MPC member will end unanimous agreement on rates but that hike is unlikely this year
The Bank of England looks likely to start the ball rolling towards its first interest rate hike since 2007 when it wraps up a policy meeting on Thursday.
The two-day meeting is likely to have produced the first split over rates in more than three years, with at least one member of the monetary policy committee (MPC) voting for higher borrowing costs, according to a Reuters poll.
But despite strong economic growth, the Bank looks set to announce at 12 noon that it is keeping its benchmark Bank rate at a record-low 0.5%, according to every forecast in a Reuters poll of 55 economists.
Investors will have to wait nearly two weeks to know if the MPC's unity has indeed come to an end. Minutes of the meeting are due to be published on 20 August.
With the UK economy widely forecast to grow by more than 3% this year, the BoE is expected to be the first central bank in a major developed economy to raise rates.
Markets expect a first hike to come either late this year or early in 2015. The speculation has pushed up sterling by more than 10% against a basket of currencies in the 12 months to early July, although it has fallen back a bit since then.
Some MPC members have said the time is coming to ease off on stimulus after unemployment fell to 6.5% in the three months to May from 7.8% a year earlier. But others on the MPC point to very slow growth in wages as a sign that the recovery in the labour market has further to run before it starts to push up inflation, which was below-target at 1.9% in June.
The BoE is expected to lower its forecasts for wage growth when it produces quarterly economic projections next week.
Charles Goodhart, a former MPC member, said uncertainty about how much more unemployment can fall without putting pressure on prices meant the BoE should hold its fire for now.
"When you're in uncharted waters, to use that horrible cliche, probably the best thing to do is not pretend you actually know what the chart says," he said, speaking at a policy discussion organised by Fathom Consulting on Tuesday.
Signs that the UK economy may have lost some of its momentum may also reduce the likelihood of a rate hike this year. Growth in the massive services sector remains strong but manufacturing stumbled in May and June.
Other risks to Britain's recovery include rising tensions over Ukraine which could hurt demand in Europe, and the shock if Scotland votes for independence in a referendum on 18 September.
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U.K. trade balance -9.41B vs. -8.80B forecast
The U.K.’s trade balance fell unexpectedly last month, official data showed on Friday.
In a report, National Statistics said that U.K. trade balance fell to a seasonally adjusted -9.41B, from -9.15B in the preceding month whose figure was revised up from -9.20B.
Analysts had expected U.K. trade balance to rise to -8.80B last month.
U.K. Trade Deficit Widened in June as Exports Declined 1.6%
U.K. exports dropped in June, ending a quarter that saw the trade deficit widen to the most in almost a year.
Overseas sales fell 1.6 percent from May and imports declined 0.4 percent, the Office for National Statistics said today. The trade gap for the month widened to 9.4 billion pounds ($15.8 billion) from 9.2 billion pounds, with the deficit for the second quarter reaching 27.4 billion pounds. That’s the most for a calendar quarter since the period through September 2013.
In a separate report, the ONS said construction output rose 1.2 percent in June from May. It said building work was unchanged in the second quarter, revising a previous estimate for a 0.5 percent drop. The change has no impact on gross domestic product data to one decimal place.
The trade deficit on goods in June was bigger than the 8.9 billion-pound gap forecast by economists in a Bloomberg News survey. The figures underscore U.K. companies’ challenge to revive exports against the challenges of weak growth in the euro area and a stronger pound. The Bank of England maintained its key interest rate at a record-low 0.5 percent yesterday to support the economic recovery.
The pound stayed lower against the dollar after the data were published, and traded at $1.6807 as of 9:34 a.m. London time, down 0.2 percent from yesterday.
The drop in exports in June was led by manufactured goods, semi-manufactured products and fuels.
Exports to the EU were unchanged in June from May, and the deficit with the bloc widened to 5.6 billion pounds from 5.1 billion pounds.
There was a 7 billion-pound surplus on services in June, leaving a total trade gap of 2.5 billion pounds. In the second quarter, the shortfall widened to 6.9 billion pounds from 5.5 billion pounds, suggesting net trade didn’t contribute to GDP growth.
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GBP/USD Forecast August 11, 2014
The GBP/USD pair initially tried to rally during the session on Friday, but as you can see ended up falling below the 1.68 level. Because of this, we think that this is a reasonably very sign in that the market should head to the 1.67 handle next. At that region, we would anticipate quite a bit of buying pressure, so we could see a bounce from that handle. If we get below the 1.67 level, at that point in time we believe that the British pound is broken and should continue to fall.
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GBP/USD Forecast Aug. 11-15
The pound posted modest losses last week, as the currency continues to lose ground. GBP/USD closed at 1.6770. It’s a busy week, highlighted by Claimant Count Change and GDP. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.
In the UK, most key releases met expectations, led by the Construction and Services PMIs. As expected, the BOE made no changes to monetary policy. The US enjoyed a solid week, as ISM Non-Manufacturing PMI and Unemployment Claims were very strong.
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