GBP/USD forecast - page 19
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1 pct Slump in British Pound Value Against Euro, Dollar - Political Headwinds Cited
The Pound Sterling enters the weekend deep in the red once again as markets remain incredibly nervous of exposing themselves to a currency burdened with Brexit uncertainty.
The Pound was easily the worst performing currency ahead of the week's close.
There currency fell by over a percent against both the Euro and US Dollar.
There was no obvious trigger behind the losses; something we have become used to of late.
Rather, sentiment appears to be the issue with traders unwilling to expose themselves to a currency that will be the flogging-horse for any future disappointment related to impending Brexit negotiations.
“Sterling remained in the defensive. Political uncertainty on the pace and the nature of the Brexit process sparked again investor uncertainty. This time comments from Foreign Secretary Boris Johson, that article 50 could be triggered early 2017 and that the exit process could take less than two year, added to sterling uncertainty,” says Piet Lammens at KBC Markets.
It appears January is sooner than markets assumed until now.
“GBP/USD shifted into reverse as Brexit risk returned to the fore, a wavering source of negativity for the pound. Boris Johnson, Britain’s foreign secretary, hinted that Britain could be on a somewhat faster track to exiting the European Union,” says Joe Manimbo at Western Union.
~ Pound to Euro exchange rate today: 1.1549
~ Euro to Pound Sterling exchange rate today: 0.8658
~ Pound to Dollar exchange rate today: 1.2950
Manimbo points out that the market sees it as a negative for the Pound if Britain has a shorter timeframe to negotiate a favourable divorce deal with its EU counterparts.
Still, meaningful moves to the downside for GBPUSD could be held in check after a Bank of England official, Kristen Forbes, played down prospects of further rate cuts given the economy’s nascent resilience in the wake of Brexit.
If UK data holds up the Bank of England may have to hold back from cutting interest rates further, and this will certainly protect some of the key supports in GBP/USD and GBP/EUR.
We believe the Pound will struggle to maintain losses below 1.1520 against the Euro and 1.2880 against the US Dollar.
That said, these levels of support are fast coming into view and those hoping for a better GBP exchange rate best hope something swings sentiment over coming days.
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British Pound Lurches Back to 2016 Lows Against Euro, Dollar - Boris Johnson Article 50 Comments Cited
Pound Sterling was seen deep in the red on the final trading day of the week 19-23rd September with analysts blaming a fresh bout of Brexit-related risk aversion for the continued selling pressure.
GBP was easily the worst performer in the group of the world's 10 biggest currencies on Friday falling by a percent against both the Euro and US Dollar.
This ensured Sterling was the worst weekly performer for the second consecutive week.
There was no obvious trigger behind the losses; something we have become used to of late and something that has frustrated commentators who like to report and discuss clearly identifiable triggers.
Rather, sentiment appears to be the issue with traders unwilling to expose themselves to a currency that will be the flogging-horse for any future disappointment related to impending Brexit negotiations.
“Sterling remained in the defensive. Political uncertainty on the pace and the nature of the Brexit process sparked again investor uncertainty. This time comments from Foreign Secretary Boris Johson, that article 50 could be triggered early 2017 and that the exit process could take less than two year, added to sterling uncertainty,” says Piet Lammens at KBC Markets.
The British Pound in Monday Slump v Euro and Dollar on Fresh Deutsche Bank Concerns
Markets are in risk-off mode at the start of the new week as Germany's largest bank falters - and this does not sit well for Pound Sterling as markets immediately question potential responses at the Bank of England.
The Pound has suffered in all market conditions of late, but the eye-watering losses on the FTSE 100 and Germany’s DAX at the start of the new week are certainly placing downside pressure on the UK unit.
Sterling is considered a ‘risky’ asset at present; the uncertainty posed by a looming Brexit is of course the prime reason for not rushing to the Pound when markets run scared.
The reason for the massive stock market sell-off concerns the terminal decline in the Deutsche Bank share price.
Germany’s largest bank saw its share price hit a record low at the commencement of trade on Monday 26th amidst fresh concerns about the bank’s solvency.
The shares dropped 4.2% to 10.93 euros at 9:15 a.m. in Frankfurt, an all-time low.
The 38-member Bloomberg Europe Banks and Financial Services Index slipped 1.5%, with Deutsche Bank the worst performer.
Chatter has it that speculators are targeting Deutsche with Markit data suggesting €200MN worth of shorts bets were taken out against the bank last week.
Furthermore, we hear German Chancellor Merkel has ruled out any state assistance for the troubled bank.
"The new week has started with a bang, as the parlous state of Deutsche Bank explodes onto everyone’s radar once again. The bank has been limping along for months now, but reports that Angela Merkel may not step in to rescue the bank have sent the shares tumbling, dragging banks across the UK and Europe lower as a result," says Chris Beauchamp at IG in London.
Remember, Deutsche Bank has been described as the biggest systemic threat to global finance by the IMF who recently stated the bank, “is one of the most important net contributors to systemic risks in the global banking system”.
On September 15th shares in Deutsche Bank plummeted after news that the US Justice Department was looking for $14BN to settle a probe into Deutsche’s mortgage-backed securities business.
"The gut feeling of most investors is that Berlin would be forced to act to avoid the loss of a key institution, but gut feelings do not always make the best trades," says Beauchamp.
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GBP/USD: Make Or Break At 1.2866: Levels & Targets - JP Morgan
The failure of Cable to break to new lows mid August raised careful hopes that a low could be in place which is currently being questioned though as the market still not far away from key-support at 1.2866 (daily trend/August low).
Only the defense of the latter would keep the door for a potentially missing C-wave up to 1.3647 if not to 1.3994 (int. 38.2 % on 2 scales) open.
A break below the August low at 1.2866 would on the other hand call for a straight extension to Fibonacci-projections at 1.2687 and at 1.2400 where the start window for a recovery would open again.
GBP/USD is down by 0.09% to 1.3007.
Deutsche Bank's Share Price Recovery Supports British Pound Against the Euro
Pound Sterling has recovered against the Euro in sympathy with the improvement in the Deutsche Bank share price confirming the continuation of an unlikely relationship between the German bank's share price and GBP/EUR.
The fate of Deutsche Bank’s share price remains a strong indicator of the movement in the GBP/EUR at present and we will be watching Germany's largest bank's performance for guidance today.
This week has seen the UK currency track the performance of the embattled bank with a recovery in the share price on Tuesday aiding a recovery in GBP/EUR to back above 1.16.
Germany’s largest bank has seen its share price plumb a record low this week amidst fresh concerns about the bank’s solvency.
This is bad news for Sterling which is considered a ‘risky’ asset at present.
"Sterling performs negatively during episodes of risk aversion due to its reliance upon foreign capital, the position reduction has allowed room for net GBP shorts to be rebuilt," says analyst Jeremy Stretch with CIBC Capital Markets.
It is meanwhile, counterintuitively, good news for the Euro which actually stands to benefit from these risk-off conditions; "note we could be seeing some evidence of balance sheet repatriation behind EUR impetus", says Stretch.
In short, when markets are running scared vast amount of Euros invested across the world are repatriated driving up the value of the currency.
The good news for sterling is that investor concerns over Deutsche Bank's stability have eased after it announced a deal to sell a subsidiary and confirmed it was not seeking government help.
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