GBPUSD news - page 38
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GBP/USD: Sterling Blown Out of the Water
Sterling lost a little bit of downward momentum on Thursday, however late Friday its downward trajectory returned with a bang.
Cable plummeted 1.16% to trade at $1.5060 shortly before the closing bell, stretching its weekly loss to an astonishing 370 points, or almost 2.5%.
As there were no economic updates in the UK, traders focused solely on US macro data, especially on the fresh release of non-farm payrolls. The reading surprised on the upside as the world's largest economy created the most new jobs in last three months in February.
The non-farm payrolls increased by 295,000 and surpassed the downwardly revised 239,000 figure seen in the previous month, while analysts had expected a drop to 239,000 in February. Therefore traders were selling the pound amid increased probability of the word 'patient' being removed from the Federal Reserve's (Fed) vocabulary at its next meeting.
Meanwhile, the unemployment rate decreased to 5.5%, the lowest since June 2008, and the trade gap in the US decreased to $41.8 billion in January, slightly missing the estimate of $41.2 billion, from $46.6 billion a month ago.
Technical analysis
The intraday uptrend has been broken and looks finished. As prices were unable to hold above $1.5350 bears are in control again and very likely will try to drag prices back to the previous long-term swing low at $1.4950.
The general trend on the daily chart is supporting this scenario and price on the intraday charts is also unable to find support as selling continues from the peak at $1.5551.
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GBP/USD forecast for the week of March 9, 2015
The GBP/USD pair fell apart during the course of the week, slicing down below the bottom of the shooting star from last week, and heading directly to the 1.50 handle. This is a market that should continue to go little bit lower, but it does have a massive amount of support just below the 1.50 level, so it’s difficult to start shorting here from a longer-term perspective. Quite frankly, long-term traders are probably on the sidelines and should continue to be so as the support below of course is going to be massive.
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GBP/USD weekly outlook: March 9 - 13
The pound fell to more than one-month lows against the broadly stronger dollar on Friday after data showing that the U.S. economy added far more jobs than expected last month underlined expectations for higher interest rates.
The Labor Department reported that the U.S. economy added 295,000 jobs in February, far more than the 240,000 forecast by economists. The unemployment rate ticked down to 5.5% from 5.7% in January, the lowest since May 2008. Economists had forecast the unemployment rate would fall to 5.6%.
The robust jobs report fuelled expectations that the Federal Reserve will start raising interest rates around the middle of this year.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped 1.39% to 97.74 late Friday, the highest since September 2003.
GBP/USD was down 1.34% to 1.5036 in late trade, the lowest level since February 3.
Meanwhile, sterling touched fresh seven-year lows against the euro, one day after European Central Bank President Mario Draghi confirmed that it will begin purchasing euro zone government bonds on Monday under its new quantitative easing program.
The combined monthly asset purchases will amount to €60 billion per month and are expected to run until September 2016, or until the ECB sees that inflation is on a “sustained path” to its target of close to, but below, 2%.
Draghi also said that the ECB expects to see higher growth and inflation over the coming years.
In the week ahead, markets will be watching Thursday’s U.S. retail sales report for further indications on the strength of the recovery, while Wednesday’s report on U.K. industrial output will also be in focus.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday as there are no relevant events on this day.
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GBP/USD: Cable Corrects, Holds Above $1.50
Pound drops against broadly stronger dollar
The pound dropped against the U.S. counterpart on Tuesday, as growing expectations for a near-term U.S. rate hike continued to lend broad support to the greenback.
GBP/USD hit 1.5029 during European morning trade, the session low; the pair subsequently consolidated at 1.5052, declining 0.51%.
Cable was likely to find support at 1.4986, the low of February 3 and resistance at 1.5135, Monday's high.
The dollar remained broadly supported after the latest U.S. jobs report heigthened expectations for higher interest rates.
The Fed is expected to begin raising interest rates around the middle of this year and investors were looking ahead to next week’s policy statement to see if it would drop its reference to being patient before raising rates.
Sterling was higher against the euro, with EUR/GBP sliding 0.41% to 0.7143.
Sentiment on the single currency was vulnerable after European Central Bank President Mario Draghi told Greek officials at a meeting on Monday that they must let euro-area representatives return to Athens and examine the government's books in order to obtain more aid.
Greece reportedly agreed to allow experts representing the European Commission, ECB and International Monetary Fund to start work in Athens on Wednesday.
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GBP/USD: Cable Wobbly Below $1.51, Awaits UK Macro
The pound was trading marginally higher on Wednesday, with market participants anticipating slightly better UK output figures later in the session, while bears have failed to breach the $1.50 support so far, despite EUR/USD plummeting towards the round number of $1.05.
Just at the London open, GBP/USD was seen at $1.5085, only mildly higher on the day.
UK output numbers are due later in the session, with industrial production seen improving 0.2% on a monthly basis, compared to -0.2% in December, while adding 1.4% on an annual basis, compared to 0.5% growth a month ago.
Manufacturing output numbers are expected to expand 0.2% on a monthly basis in January, from 0.1% growth in the previous month, and expand to 2.6% growth from 2.4% recorded in December.
Cable will, however, mostly be trading according to US fundamentals, rather than UK data, and the longer-term trend remains bearish, with a possible test of the $1.50 area in the coming days as the Federal Reserve meeting looms.
The central bank is expected to drop its "patient" phrase entirely and hint at a June rate hike. The expectations built up even more after Friday's stellar payrolls. The Bureau of Labor Statistics reported that in February the US economy had created 295,000 jobs, above analysts' expectations of 235,000, while last month's figure was revised down from 257,000 to 239,000. The unemployment rate ticked lower from 5.7% to 5.5%.
As there are no US macro news on the agenda today, traders will probably stay back and wait for Thursday's US retail sales, which are currently a key factor and might reveal that US consumers are still doing pretty well and were not affected by the snowy weather on the Eastern coast of the US in the previous weeks. Furthermore, consumer confidence indices will be published later in March, which are expected to remain at multi-year highs.
"The USD continues to trade strongly, despite a lack of new data and a modest retreat in US front-end yields. The dollar appears to be increasingly trading on its own momentum and even driving price action in other markets, with oil, rates and equities all seemingly responding to developments in the currency markets to some extent. The recent USD rally is slightly ahead of the US yield advantage. With key USD pairs rapidly overtaking many forecasts once viewed as aggressive (including our own) and hitting established trading targets, many market participants are unsurprisingly questioning whether moves have been excessive and could be prone to correction," analysts at BNP Paribas wrote in a note on Wednesday.
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January 2015 UK industrial production -0.1% vs 0.2% exp m/m
Details of the January 2015 UK industrial production data report 11 March 2015
Not the sort of report you want to read to start the year. IT production and machinery work fell following a decent December. The ONS say that work was boosted in Dec by a big public sector defense contract.
GBP/USD drops through 1.5050 to 1.5037
UK Economy Keeps Momentum in February: NIESR
The UK's gross domestic product (GDP) growth kept its pace at 0.6% in the three months to February, after a downwardly revised 0.6% measured in the quarter to January, according to a closely-watched gauge published today by the National Institute of Economic and Social Research (NIESR), Britain's longest established independent economic research institute.
NIESR publishes its quarterly GDP estimates on a monthly basis and analyzes floating quarters, as opposed to the official data provided by the Office for National Statistics (ONS), which gathers figures on the basis of calendar quarters.
The latest official estimate confirmed the UK economy slowed down to 0.5% in the fourth quarter of 2014, from 0.7% in the previous quarter.
In its February forecast, the Bank of England (BoE) said it expected growth in the fourth quarter to be revised slightly upward to 0.6% after the final estimate, due later in March. Further on, the BoE left 2015 annual GDP unchanged at 2.9%, but revised up 2016 growth to 2.9%, from 2.6% estimated in its November forecast. It also said cheap oil should help boost real income and consumer spending this year.
In its earlier report, NIESR revised growth projections for the whole of 2015 up to 2.9%, from the 2.5% it expected in November last year. In 2016, NIESR expects growth to moderate to 2.3% "as the positive impact of the oil price shock dissipates and domestic demand growth softens." Weaker domestic demand should then be partly offset by stronger UK exports, which are expected to get a boost from a stronger global economy, NIESR argued.
NIESR also estimated the rate of consumer price inflation to float at around 0.5% for the rest of this year, although it warned of "considerable uncertainty" surrounding the forecast. It said that a pass-through from cheap oil and sterling exchange rate increases in H1 2014 is "significantly disinflationary but is expected to be only temporary."
Sharp falls in food prices and crude oil have led to record low inflation in the UK, hitting 0.3% in January and is expected to fall further either in February or March.
The UK labor market is set to continue to tighten this year, with the jobless rate falling to 5.2% by the end of this year. On wages, NIESR suggested that "in the near term, real wages and consumer spending will be boosted by the disinflationary effect of the oil price shock. Beyond this, it is the performance of productivity that is the key to real wage growth, and it remains the most significant domestic risk to the UK’s economic outlook."
"If the recent poor productivity performance is a structural rather than a cyclical phenomenon, as assumed, then this would have serious implications for future standards of living as well as economic policy," NIESR said.
UK Trade Gap Narrows to Smallest in 19 Months
Britain's trade balance deficit narrowed to £0.6 billion, compared with expectations of it shrinking to £2.3 billion reflecting a large fall in imports, half of which came from oil imports. The small deficit was affected by a surplus of £7.8 billion on services; the largest since January 1998, data from the Office for National Statistics (ONS) showed today.
Between December and January both exports and imports fell, with imports showing their largest monthly decrease since July 2006. However, despite exports also dropping by £1 billion, the ONS's Katherine Kent said exports to the USA reached a record monthly high, rising by £1.1 billion, offset by a fall in exports to Switzerland by £1 billion. The fall in imports came mainly from countries outside of the European Union.
Imports of manufactured goods such as machinery, transport equipment and chemicals also fell, as well as oil, according to data from the ONS.
In the three months to January, the UK's deficit on trade in goods and services was £4.4 billion, which is the smallest since the three months to October 2000, due mainly to a 7.3% rise in exports to countries outside of the EU and drops in worldwide imports.
The British Chamber of Commerce (BCC) said on Monday that export and trade growth should be at the heart of the next government’s economic strategy.
In a survey of 4,700 companies, new exporters - or those that were less than two years old - accounted for a mere 11% of exporting firms.
BCC’s director general John Longworth said: “Business and government can and must work together to help more companies enter the export game, and ensure that the UK has a steady flow of firms keen to move beyond the domestic market for the first time.
"It will take a concerted campaign to achieve the ambitious export targets set by the Prime Minister. By working together, business and government can eliminate the UK's stubborn trade deficit - and unlock future economic growth."
Howard Archer Chief European & UK Economist said the hope was that: “exports will increasingly benefit as 2015 progresses from improving global growth, particularly a pick-up in expansion in the Eurozone as it benefits from very low oil prices, a much more competitive euro and substantial ECB stimulus.”
He added: “The current strength of the pound will be of some concern to UK exporters. Sterling has traded at a seven-year high against the euro in March and it also hit a more than six-year high on a trade-weighted business in late-February.”
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GBP/USD: Cable Eyes New Lows, $1.49 Hard to Crack
The pound was little changed versus the greenback after the European markets opened, rebounding after diving to its weakest level since July 2013 earlier on Friday.
The pound edged down 0.05% to $1.4876, with traders deciding where to take the cable after it spilled to $1.4845 earlier in the session, its weakest level in a year-and-half.
Bank of England MPC members Minouche Shafik is scheduled to speak on Friday, following important speeches by Governor Mark Carney and MPC member Martin Weale.
"Carney’s speech highlighted risks to the inflation and growth outlooks from the firming exchange rate, while Weale hinted that he will again vote for a hike in coming months. We believe that the first rate hike from the BOE [will] come early next year," BNP Paribas said in a note on Friday.
Sterling shed over 100 pips on Thursday, crossing from $1.50 to the $1.49 handle following a speech from Bank of England Governor Mark Carney at the Advanced Manufacturing Research Centre in Sheffield.
BoE chief Carney said during his speech in Sheffield that low inflation is a test for central banks and that it is positive for economic growth. He pointed to the fact that the pound's impact on CPI is being closely watched, and added that strong sterling could stall the BoE's rate hike in the coming years.
Carney said that core inflation, currently at 1.4%, was likely to fall further "in the coming months, reflecting sterling’s past strength and muted domestic cost growth."
Technical analysis
GBP/USD retest a swing low below the big round number of $1.5000 at $1.4892 in the very volatile session. The current intraday and daily downtrend is in symmetry, but on four hourly charts the conditions are hugely oversold and prices are trying to consolidate at a very crucial spot.
If prices rebound and spike, sellers will very likely step into the play at the barrier in the form of previous support and at the big round number of $1.5000-5050.
A very long timeframe for sterling was a zone of $1.48 which acted as a very strong support back in 2013, and if prices break through the current swing low, only spot where some buyers will possible step in to the action is at $1.48.
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