- Percentage of buy orders surged from 46 up to 59%,
- Share of bulls slightly but inched from 56 to 57%
- GBP/USD heads towards the 2013 low at 1.48
- Survey: Sterling to decline in the long run
- Upcoming events: UK Manufacturing PMI, US ISM Manufacturing PMI, Personal Spending, Price Index
Friday's fundamentals failed to help the Pound to appear among the top performers. While the British currency gained 0.89% against the Loonie, it also depreciated 0.69% relative to the Japanese Yen.
British consumer confidence rose more than expected in January to reach the highest level in five months, providing a support to Prime Minister David Cameron ahead of the general election in May. According to GfK, a consumer sentiment index jumped 5 points to +1 in January, recording the biggest monthly increase in a year and hitting the level last seen in August, which was the highest since 2005. Consumers helped pushed the UK to the strongest growth since 2007 last year as exports struggled due to economic and political problems in the neighbouring Euro zone. It is expected that an oil-triggered decline in inflation, increasing wages and the prospect of interest rates staying at historic lows this year could see the economy grow at a similar pace this year.
A separate report showed the number of mortgage approvals rose in December despite signs of moderation in the housing market. Mortgage approvals increased to 60,275 in December, according to the Bank of England's report. Additionally, the volume of credit for house purchases also rose by 1.6 million pounds. The number of approvals dropped in most months last year, cooling house price growth and alleviating concerns about a bubble in the housing market. Mortgage lender Nationwide said that British house prices rose at their slowest pace in 14 months in January, soaring by less than 7% on an annual basis.
UK and US Manufacturing PMIs
Today GBP/USD is expected to be mainly driven by the relative performance of manufacturing sectors in the United Kingdom and the United States. According to the forecasts, the former reading is likely to improve from 52.5 to 52.9, while the latter is estimated to decline from 55.5 to 54.9.
GBP/USD targets 1.4930
Simon Smith, Chief Economist at FXPro, advises not overestimate bullish potential of the US Dollar in 2015. 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".
As for the Sterling itself, Charles Purdy, CEO of Smart Currency Exchange, sees weakness in the nearest future, arguing that "the UK election will count against Sterling" in terms of "higher levels of uncertainty". According to the analyst, GBP/USD is likely to fall to 1.46 by the end of March. However, in a year he expects the exchange rate to recover to 1.48, after the BoE hikes the interest rates in the second half of 2015.
Daily chart
GBP/USD is currently trading in the middle of a short-term bearish channel and is moving towards the lower boundary of the pattern at 1.4930. The currency pair may have some trouble with the support at 1.50, as it was the case the last two weeks, but the overall downward momentum should nonetheless remain intact. In the longer term the Pound is expected to slide even deeper, down to the 2013 low at 1.48, while the immediate ceiling is seen at 1.52.
Hourly chart
Stronger demand for GBP
Cheaper Sterling is attracting more bulls, their share slightly but inched from 56 to 57%. As for the orders, the percentage of buy ones surged from 46 up to 59%, also signifying that the demand is growing.
Over the weekend the SAXO Bank clients scaled back their Pound-long positions, and the bulls now constitute 57% of the market. Meanwhile, the difference between the amounts of long and short positions at OANDA is minimal, only four percentage points.