GBPUSD news - page 43

GBP/USD: Pound Down as BoE Stays in Wait-and-See Mode

The pound decelerated against the greenback on Tuesday, after the Bank of England (BoE) left policy unchanged at its April meeting.

Sterling slipped 0.28% to $1.4824 on Thursday, staying far from its intraday high at $1.4885.

The BoE left the base interest rate unchanged at the record low of 0.5% in April. More on the vote composition among the nine-strong Monetary Policy Committee (MPC) will be revealed in the minutes from today's meeting, due on April 22.

The central bank remains in wait-and-see mode as new forecasts loom. The policymakers will report on their outlook for inflation, economic growth, and the labor market on May 13 within the regular quarterly Inflation Report.

At the March meeting of the MPC, policymakers argued that the outlook for labor costs remained defined by two opposing forces. On one hand, a lower jobless rate could push up inflation in the medium term, but on the other hand, significantly weak inflation may turn into lower inflation expectations and those could lead to suppressed wage growth.

Looking ahead, UK industrial and manufacturing numbers for the second month of the year will be reported on Friday. Industrial production data are seen as improving 0.3% on a monthly basis compared to -0.1% in January, and adding 0.3% on an annual basis compared to 1.3% growth a month ago.

In the meantime, the report on the UK's trade balance showed a deficit of £2.86 billion in February, missing estimates, after the gap of £1.54 billion a month before, according to the Office for National Statistics.

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GBP/USD: Pair Skims Floor of 3-Wk Range; Rates on Hold for Now

The British pound traded near three-week lows against the US dollar on Thursday following a dearth of material news from both central banks.

Neither the Bank of England (BoE) nor the Federal Reserve (Fed) provided much clarity about the near-term outlook for policy rates and as a result the GBP/USD pair remained in the range seen since the middle of March.

The market favored the dollar on Thursday though, pushing sterling down 0.96% to buy $1.4723 after an upbeat reading in US jobless claims hit the wires earlier in the day, briefly pushing the cross below $1.4720 for the first time since March 20.

A mere 281,000 individuals applied for unemployment benefits last week, the US Department of Labor said, less than the market had been expecting, but up from the previous week. Economists cautioned against putting too much emphasis on the numbers this time of the year as the Easter holidays and spring break can lead to higher-than-usual noise in the data.

Still, over the most recent four weeks claims averaged 282,250 which is less than in any corresponding period since June 2000, which is an assuring sign that the labor market continues to heal rapidly, especially after the surprisingly weak March payrolls report last week.

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It will be interesting to see what will happen to Pound when SNP wins in Scotland

UK Factories Slow Down in February

he UK's manufacturing industry improved in February compared with the surprise decline in January, but slowed from growth rates marked previously. The healthy growth in this sector helped to bolster total production, which performed on the upside, but total growth was not as healthy as the markets had expected, figures from the Office for National Statistics (ONS) showed on Friday.

Total industrial production rose 0.1% compared with an expected 0.3% rise against January's fall of 0.1%. Three of its main sub-sectors saw a rise, the largest of these rises being in manufacturing. Dragging growth down was a sharp fall in mining and quarrying which plunged 2.7% due to lower production in some of the North Sea Oil terminals and gas fields.

The ONS said oil production at Sullam Voe was 1.7% down compared with the same period last year, and a couple of the other rigs were not performing at the levels seen in 2014.

Mining and quarrying also dragged down the year-on-year growth for total production which rose a mere 0.1% compared with February last year.

Manufacturing output in the UK increased 0.4% between January and February, with increases in seven of the 13 manufacturing sub-sectors. The largest of these was the manufacture of transport equipment which is up 1.6% on the month. The area with the biggest decline was the manufacture of basic pharmaceutical products.

Year-on-year manufacturing didn't meet expectations with a rise of only 1.1%, compared with an expected 1.3% rise, despite output increasing in nine of the 13 sub sectors. Mining and quarrying output fell by 6% compared with February last year, with the largest downward contribution coming from the extraction of oil and gas which fell 12%, the biggest drop since August 2013.

In its quarterly economic survey released on Thursday, the British Chamber of Commerce (BCC) said after a strong fourth quarter, manufacturing firms reported weaker growth at the start of 2015.

The survey, which is based on responses from 7,500 firms, showed almost all balances for manufacturing weakened in the first quarter of 2015.

David Kern, chief economist of the BCC said: “The Q1 2015 results show falling inflationary pressures, particularly in manufacturing, and easing pressures on capacity; this reinforces our view that the MPC must maintain interest rates at their current low level at least until early in 2016.”

Looking ahead to March data, compiler Markit said UK manufacturing production, “expanded at the fastest pace in nine months during March, underpinned by the steepest gain in incoming new business since July 2014."

The Markit data report added: “The strong domestic market remained the principal source of new contract wins.”

In its latest survey of the UK industry, the Bank of England (BoE) observed that manufacturing output growth for the domestic market had edged lower between February and March, and export growth had picked up slightly from low levels. The feedback from manufacturing firms also showed demand from the euro area and Russia weakened, while exports to the US strengthened, partly reflecting the appreciation of the dollar.

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GBP/USD hits new multi-year lows – 3 reasons

Cable is under the cosh: the pair trades at 1.4640 after already hitting a low of 1.4622. These levels were last seen in June 2010, when the UK economy was doing much worse than it is doing today.

Here are three reasons behind the fall:

1. Election uncertainty: This was always a dark cloud above the pound, but things are far from improving. The most recent polls show a tie between incumbent PM Cameron’s conservative party and challenging Labour. It gets worse as both parties are far from reaching an absolute majority. Coalition governments make it harder to rule. And, we have recently seen a strengthening of the Scottish SNP. A Labour-SNP coalition is probably the worst outcome for markets.
2. FOMC Minutes: From the US side, we have learned that in March, some members of the central bank want to see a hike in June. Having hawks on the board is not news, and the meeting was held well before the bad NFP report. When this report came out, we heard from Fed officials that it would impact the next decisions. The minutes seem like an excuse to buy dollars.
3. Weak British data: Industrial output and manufacturing production came out weaker than expected. It was not a disaster, but it gave the pound the last strike, especially as it was already vulnerable due to the dollar’s strength and the elections: worse economic data weakens the chances of Cameron to win, and markets don’t like that. Also yesterday’s trade balance disappointed.

What’s next for the pound? It could get worse before it gets better. Once a new government is formed, things will probably calm down. But there’s enough time between now and May 7th, and the actual formation of a government.

GBP/USD Weekly Fundamental Analysis, April 13-17

The GBP/USD saw a lot of action this week with the Bank of England holding rates and policy. The pound ended the week at 1.4633 down 79 points against the strong US dollar. For the three months to the end of February, the ONS said exports to the European Union were at their lowest since records began in 1998, leaving the EU goods deficit at a record high of £21.1bn, thanks particularly to a fall in oil exports.

UK trade figures show the extent of import and export activity. The figures could add to concerns that the UK economy remains too dependent on consumer spending, which accounts for more than 70% of economic activity. Howard Archer, chief UK economist at IHS Global Insight, said: “The trade data are undeniably disappointing and deal a significant blow to hopes that net trade helped UK GDP growth in the first quarter.” The Bank of England kept interest rates at their record low on Thursday as policymakers wait to see whether a tumble in inflation is short-lived or turns into a bigger threat for the British economy. In its last interest rate decision before a national election on May 7, the Bank left its benchmark borrowing rate at 0.5 percent, its level since the height of the global financial crisis in 2009.

Federal Reserve officials at their latest policy meeting were still refining how to raise interest rates when the time comes, according to minutes. Raising rates will be different this time, given the Fed’s large balance sheet. The Fed used to control the amount of reserves in the banking system, but now banks are awash with more than $2 trillion in excess reserves. To raise rates, the Fed is going to raise the interest rate it pays banks to park their reserves at the Fed. To make sure the rate doesn’t leak, the Fed has been testing a reverse repurchase agreement program.

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Pound Falls to Five-Year Low as Volatility Jumps Before Election

The pound slipped to an almost five-year low against the dollar as the U.K. election campaign entered its final month, with investors bracing for a contest that’s set to be the tightest in a generation.

Sterling posted its worst weekly performance in a month versus the U.S. currency and volatility surged to a five-year high as polls showed the May 7 vote is unlikely to produce a clear winner. The pound also dropped as the Bank of England voted to keep interest rates at a record-low 0.5 percent for a 73rd month. U.K. government bonds were little changed.

“One of the things we have been flagging is that the options market for quite some time has been pricing in a lot of uncertainty around the upcoming election,” said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London. “It still looks like there is plenty of scope for investors to sell sterling ahead of the election.”

The pound fell 1.8 percent this week to $1.4648 at 5 p.m. London time on Friday, when it touched $1.4587, the lowest since June 2010. The U.K. currency strengthened 1.6 percent to 72.35 pence per euro.

Sterling is falling as opinion polls put the Conservatives and Labour neck-and-neck, reinforcing the likelihood of protracted negotiations to form a government. Three polls on Thursday had Labour leading, in one case by as much as six percentage points, while two placed the Tories ahead by one percentage point.

Volatility Surges

Sterling may fall toward $1.43, BNP’s Sneyd said. A measure of anticipated price swings in the pound against the dollar in a month’s time climbed about 2 percentage points this week to 12.78 percent and touched 13.64 percent, the highest since June 2010, according to data compiled by Bloomberg. That’s up from 6.9 percent at the end of last year.

Comments from BOE officials before the quiet period until elections suggested there’s a split in the Monetary Policy Committee on the outlook for inflation. A report next week will show the annual rate of consumer-price growth stayed at zero for a second month in March, according to the median estimate of economists in a Bloomberg News survey. Investors are all but ruling out an interest rate increase before the middle of next year, Sonia forward contracts show.

U.K. 10-year gilts yielded 1.58 percent. The price of the 5 percent gilt due in March 2025 was 131.23 percent of face value.

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GBP/USD Forecast Apr. 13-17

The British pound plunged last week, as GBP/USD lost over 300 points. The pair closed at 1.4614. This week’s highlights are CPI and Claimant Count Change. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD. This week’s highlights are CPI and Claimant Count Change. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

The pound took a dive following weak UK manufacturing numbers, election uncertainties, and hawkish sentiment in the FOMC minutes. In the US, employment job numbers rebounded last week. JOLTS Job Openings improved and the 4-week jobless claims was the lowest since 2000.

1. BRC Retail Sales Monitor: Tuesday, 00:01. This indicator looks at the change in retail sales value in BRC shops. The index has posted two straight gains of 0.2%, pointing to weak spending by the UK consumer. We’ll get a look at official retail sales numbers next week.
2. CPI: Tuesday, 9:30. This is the first key event of the week. Inflation levels continue to head lower in the UK, as CPI slipped to 0.0% in February, very close to the forecast. No change is expected in the March report.
3. PPI Input: Tuesday, 9:30. This manufacturing inflation indicator has struggled, as the February gain of 0.2% broke a long string of declines. This reading was well off the forecast of 1.6%. The markets are expecting a downturn in the March release, with an estimate of -0.5%.
4. RPI: Tuesday, 9:30. This consumer inflation indicator includes housing prices, which are excluded from the CPI release. Like CPI, the indicator has been on a sustained slide, and softened to 1.0% in February, within expectations. The markets are expecting another 1.0% gain in the March report.
5. CB Leading Index: Wednesday, 2:30. This minor event is based on 7 economic indicators. The indicator posted a small gain of 0.2%in January. Will we see more of the same in the February release?

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Gbpusd

The GBPUSD may keep dropping and try to break once again the 1.4600 level if retail sales from the US come out better than expected.

Sterling Remains Vulnerable, $1.45 in Play

The pair followed commodity currencies lower during the Asian session on Monday and briefly dipped below the $1.46 handle. European traders bought the dip, but the rally was very short-lived and cable dropped back below $1.46. The dollar was gaining broadly, boosted by deteriorating Chinese data.

During London trading, cable was around 0.2% lower on the day and trading at the $1.46 mark.

The world's slowdown is getting real as the World Bank cut China & East Asia economic outlook, which should offer more support for the greenback in the long term.

Positioning on the cable is only slightly bearish, meaning there is some room for further selling. The pair broke to new swing lows, confirming the bearish bias, which should materialize further ahead of the UK general election, which pose political risks.

Moreover, investors await Tuesday's inflation data from the UK, including CPI, PPI and RPI indices. CPI core on a yearly basis is predicted to stay at 1.2%, while the normal CPI figure is expected to remain at 0.0%.

Weak Chinese trade report reinforces slowdown concerns

"The trade report has reinforced expectations that the Chinese economy has likely lost further growth momentum in Q1. The Chinese GDP report for Q1 is scheduled to be released on Wednesday. The current consensus expectation is for the annual rate of real GDP growth to ease further to 7.0% which would be the slowest pace since Q1 2009. The government is targeting an increase of “about 7%” for this year. An official from China’s statistics bureau has also reportedly written an article in the People’s Daily stating that the resource sectors of the Chinese economy face stronger downward pressure while consumption and high-tech industries remain stable or relatively faster growth. The economy as whole remains in a reasonable range and that policy fine-tuning needs to be intensified," analysts at Bank of Tokyo-Mitsubishi wrote in a research note on Monday.

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