- The percentage of buy orders plunged from 44% to 24%
- The position of longs improved compared to Monday (52%), now they constitute 54% of the market
- 17% of traders still see the pair between 1.54 and 1.56 in three months
- Closest resistance is located at 1.5164, represented by the weekly PP, while the nearest support lies at 1.5096 monthly S1
- Upcoming events: US JOLTS Job Openings, UK BOE Gov Carney Speech, UK MPC Member McCafferty Speech, UK Manufacturing Production, UK MPC Member Weale Speech, UK NIESR GDP Estimates, US Crude Oil Inventories, US 10-y Bond Auction, US Bank Stress Test Results
Monday was a high-performance day for the Sterling, as it appreciated against most majors. The Pound strengthened the most against the Japanese Yen and the Aussie, adding 0.87% and 0.79%, respectively, whereas the least but still substantial gain was versus the Loonie, specifically 0.44%.
Britons' expectations for inflation over the coming 12 months dropped to the lowest level in over 13 years in February, the Bank of England said. Inflation expectations for the year ahead declined to 1.9% last month, the lowest level since late 2001, down from 2.5% in November. Moreover, expectations of inflation in two years' time also fell, down to 2.1% from 2.5%. The projections for five years were also pushed down to 2.8% from 3%. The survey results came as consumer price growth in Britain declined to a record low 0.3% in January. Furthermore, the share of Britons anticipating interest rates to rise in the coming 12 months fell to 36%, following 37% in November, while the proportion predicting a cut in rates doubled to 8%, the highest level since August 2012.
Last week the Bank of England opted to keep the interest rate unchanged in March, marking six years since policy makers reduced borrowing costs to all-time low levels to help the UK economy recover from a deep recession. The Monetary Policy Committee maintained the central bank's benchmark rate at 0.5% and agreed to leave the size of the bond portfolio unchanged at 375 billion pounds. Prospects of a very low near-term inflation led the MPC members to unite on rate vote in January after five months of a disagreement at the panel.
John Redford, senior FX consultant at Worldwide Currencies, considers that "the data are still very strong for the Sterling as a whole", and should the Conservatives form a coalition government as a result of the May elections, he would expect "potentially a move to 1.60 in the short term." Conversely, if Labour forms a government, "1.50 could be very much vulnerable."
Focus on US JOLTS Job Openings, Carney's Speech and UK Manufacturing Production
Today the US JOLTS Job Openings are expected to improve, thus possibly putting pressure on the Sterling, while Carney's and McCafferty's speeches are to have high impact on the British Pound but their effect on the currency is less certain. However, on Wednesday positive UK data is likely to help the Sterling versus the US Dollar.
GBP/USD experiences shallow rally
On Monday, the GBP/USD pair managed to rebound 93 pips after declining throughout the previous week. The pair appreciated more than expected and ended the trading day at 1.5127. However, after exiting the wedge, the Sterling appears to be attempting to re-enter the downtrend, which it has been following since summer 2014. The weekly technical indicators suggest the Pound will weaken even more, while the daily studies remain mixed. BoE Governor Carney's speech later today is likely to have a high impact, but the effect of a bearish reaction should be limited by tough support at 1.50.
Daily chart
The hourly chart shows the Sterling slumping against the Greenback since the beginning of Tuesday. The lower Bollinger band provided some support at first, but later the Pound tripped through the daily S1. The British currency is likely to keep falling until Carney's speech, which might either accelerate the decline or turn the pair around.
Hourly chart
Bulls edge up
The position of longs improved compared to Monday (52%), now they constitute 54% of the market. Meanwhile, the percentage of buy orders plunged from 44% to 24%.
The sentiment among the SAXO Bank clients remains stable, being that 57% of open positions are still long. OANDA traders' outlook towards the Pound slightly worsened, as 53% (previously 59) of market participants are to profit from Sterling's appreciation.