- The percentage of sell orders fell to 51%
- 60% of open positons are long
- GBP/USD aims for 1.48
- Upcoming events: UK Manufacturing Production, Trade Balance, US Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings
In line with expectations the Bank of England kept monetary policy unchanged after its first meeting in 2015, amid cooling inflation, which fell to the lowest level in 12 years, and softer growth at the end of 2014 and going into 2015. The nine-member panel also kept the size of the BoE's bond portfolio at 375 billion pounds ($567 billion). The BoE's benchmark rate has been kept at historic low since March 2009, when central banks around the world started to ease monetary policy in order to boost demand following the financial markets crash in 2008. As for the strength of the UK economy, business activity in the UK services sector, the biggest segment of the nation's economy, slowed markedly. Thus, the fourth quarter GDP data might show the economy's growth rate eased at the end of 2014, but the year is still set to be the strongest period of growth since the financial crisis. Inflation remains significantly subdued and is seen to remain below the 2% official goal until late 2017. Falling energy costs and food prices should keep price pressures contained, thus leaving households with more cash.
Two of the nine members of the BoE's Monetary Policy Committee, Ian McCafferty and Martin Weale, voted for a rate rise between August and December. The BoE will publish voting records and reasons behind January's policy decision on Jan. 21.
Event of the month: US NFP
While the yesterday's releases had no visible impact on GBP/USD, today's data may either strengthen the current momentum or even result in a reversal, as they are more volatile and harder to predict. The first important event is the growth of the UK Manufacturing Production at 11:30 am GMT. However, the true turbulence is likely to start four hours later, when the Bureau of Labor statistics is scheduled to publish the US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings.
GBP/USD to gravitate towards 1.48
Simon Smith, Chief Economist at FXPro, advises not overestiment bullish potential of the US Dollar. According to him, "we will see Dollar strength through the year, but it's going to be a very difficult year in terms of trends".
Daily chart
The bearish pressure on the Sterling has somewhat tempered, but the bias remains negative. The monthly S3 should now act as a resistance, while GBP/USD itself is expected to keep moving lower, having violated all the nearby significant supports. The medium-term target is at 1.48, where the currency pair will meet the 2013 low, though the technical indicators are mixed.
Hourly chart
Less commands to sell
The sentiment towards the Pound is perfectly unchanged — 60% of open positions are long. The share of the bulls is lower at OANDA, where 56% of market participants are long the Pound, and at SAXO Bank, where 58% of clients plan to profit from Sterling's appreciation.
The percentage of the sell orders, on the other hand, keeps decreasing. It has already fallen to 51% (58% yesterday and 60% five days ago), suggesting the supply of the currency is contracting.
Spreads (avg, pip) / Trading volume / Volatility
Pound to stabilise near 1.5850 in Q1
Concerning the present week, the sentiment among the FX Community members experienced some changes, but the vast majority of all votes are still negative on the GBP/USD currency pair, namely 58% of them. The average prediction for Friday of this week is located around the 1.540 major level. According to one of the bears, rokasltu, GBP/USD "will go downside along with EUR/USD. During this week it might diminish by 150-200 pips".