- The share of sell orders went noticeably up, namely from 53 to 60%
- There are more bears (54%) than bulls (46%)
- 17% of traders see GBP/USD at 1.54/1.56 in three months
- The short-term upper and the lower limits are at 1.49 and at 1.48, respectively
- Upcoming events: UK Net Lending to Individuals (Feb), US Personal Spending (Feb), Pending Home Sales (Feb), FOMC Member Fischer Speech
Friday's best performer was the Sterling, as the currency gained as much as 1.20% against the Australian and Canadian dollars. The smaller advance was recorded relative to the Swiss Franc, namely 0.10%.
Property prices in the United Kingdom have increased this month, even though growth remained subdued after strong gains a few years ago. According to Nationwide, the agency which is publishing housing price data every month, the average price of a house in the country edged up just 0.1% in March on the annual basis, or somewhat lower than a 0.2% gain forecasted by the majority of analysts. Moreover, on the annual basis a downward change was even steeper, with prices going up 5.1%, down from 5.7% seen in February. Therefore, prices' growth has been decreasing for the seventh consecutive month. In 2012 and 2013 they have registered a strong climb, and the current situation is usually explained as a calm-down with the HPI Index returning to less volatile and stable levels. At the moment prices are staying around 2% above the pre-crisis peak.
In the meantime, Nationwide's experts are pointing on still rather broad differences in price tendencies across Britain. The strongest rate of annual advance was posted by the South of England and London, two regions where economic situation seems to be more optimistic, compared with other parts of the country. North West England, Wales and Scotland have all seen prices cooling down, with Wales alone providing a drop of 0.5% in Q1 on the yearly basis. Moreover, prices in these three regions remain below the pre-recession peak level reached in 2007.
Nicholas Ebisch, Corporate Account Manager at Caxton FX, agrees with Mark Carney's statement before the House of Lords Economic Affairs Committee that "at this point it would be foolish for the BoE to cut interest rates," since it would "add unnecessary volatility to inflation." Ebisch also mentioned that the BoE Governor's use of the word 'foolish' shows that "the MPC is firmly against the interest rate raise at this time."
Plethora of low-impact events
Though there is a decent amount of data to be published today, both concerning the United Kingdom and the United States, the Cable is unlikely to demonstrate elevated levels of volatility due to low impact of the scheduled releases. The main event for the Pound is expected to be the change in the lending to individuals, which is estimated to accelerate. As for the US Dollar, around noon we will see whether consumers indeed spent more in February. Meanwhile, the previous two readings showed a decrease in their expenditures.
David Starkey, Senior Market Analyst from Cambridge Mercantile Group, commenting on the Fed removing 'patience' from Fed's interest rate guidance, said that "Yellen lowered expectation for GDP, inflation, and as such – the trajectory of Fed rates." He noted that "in December the last economic projections were that the Fed rates would be over 1% at the end of 2015." However, the most recent data showed the Fed now only expects rates to go as high as 0.625% by the end of 2015. "As such, the overall result was Dollar-negative," he explained.
GBP/USD trapped between 1.49 and 1.48
GBP/USD continues to consolidate. And while previously the currency pair was bound by 1.50 from above and by 1.47 from below, volatility since then has notably subsided. Now the upper and the lower limits are at 1.49 and at 1.48, respectively. Still, the market is bearish (since July 2014), meaning supports are in larger danger than resistances. Accordingly a breach of the monthly S2 will imply extension of losses to 1.47.
Daily chart
The hourly chart confirms the absence of any distinct trend, but the bias is to the downside, mainly because of the falling resistance trend-line at 1.4950. The demand is supposed to be at 1.48, but the decline may well extend down to 1.47, which prevented depreciation of the British currency earlier this month.
Hourly chart
Sentiment neutral, but with a bearish bias
Though there are more bears (54%) than bulls (46%), the difference is too small to claim that the sentiment is negative. Meanwhile, the share of sell orders in the 100-pip range from the spot went noticeably up, namely from 53 to 60%.
Though there was an increase in the share of long positions at SAXO Bank last week, over the weekend the percentage of bulls fell down to 45%. OANDA traders are slightly more optimistic with respect to the Pound's prospects, but the sentiment is neutral: 51% of positions are long and 49% are short.