- The buy orders take up the major part of the market, namely 63% of it (previously 46%)
- The portion of long positions fell by one percentage point, and at the moment they account for 41%
- 14% of traders see the British currency at 1.44-1.46 in three months
- Nearest support lies at 1.4814, represented by the 20-day SMA, while closest resistance rests at 1.4882, namely the weekly R1
- Upcoming events: US Building Permits, US Unemployment Claims, US Housing Starts, US Philly Fed Manufacturing Index, FOMC Members Lockhart and Fischer Speeches
The British Pound experienced mixed performance over the day, as it appreciated against some major peers and also declined against the others. The Sterling added 0.41% versus the US Dollar, 0.20% versus the Yen and 0.13% against the Euro. Losses were registered against other major currencies. The largest decline of 1.16% was seen versus the Loonie, following with a 0.54% drop against the Kiwi.
British inflation remained at its all-time low in March, as gas prices continued to weigh on cost of living in the UK, while prices for clothes and shoes broke with the usual pattern. According to the Office for National Statistics, the UK's inflation stayed at 0% for the second consecutive month in March, marking the lowest level since records began in late 1980s. Clothing prices fell 0.1% between February and March, the first time in the history of the consumer price index that clothing has declined during this period. The sharp fall in inflation has been caused by the precipitous decline in oil prices, as well as drops in food prices. However, core measure of inflation, which strips out volatile energy, food, alcohol and tobacco, slid to the lowest level in nearly nine years at 1.0% in March compared with 1.2% in February.
A separate report showed input prices rose between February and March, beating expectations for a fall into deflation. UK input price index increased 0.3%, up from the 0.1% rise a month earlier, and considerably above the median estimate of a 0.4% monthly drop, the Office for National Statistics reported. The index was driven up by a 4.3% rebound in crude oil prices between February and March. Meanwhile, the UK house price inflation cooled in February to 7.2%, compared with the 8.4% reading in January.
In light of the recent data, Ian Stewart, chief economist at Deloitte, reckons "the UK has quite good momentum," which largely stems from the exports and the consumer. He also sees "decent recovery" in the investment, and this is likely to result in the UK being "one of the fastest growing economies in Europe." At the same time, Steward does not consider the elections to be a major risk factor for this recovery, though he does acknowledge a likelihood of greater volatility in financial markets in the run-up to the general election.
According to the economist, the general effect of strong economic data out of the UK should be supportive of the Sterling, particularly against the Euro, while concerning the speculations on the UK leaving the European Union, Stewart thinks this is a low-probability event, with the chances that are "well below 50%," since most political parties and a large portion of business and media would likely campaign in favour of continued membership.
Several US economic figures expected to improve
Several important US Data releases are due today. All of the data are expected to show improvement, except for the US Building permits. But the permits should not worsen by a wide margin and are unlikely to outweigh other economic data. As a result, the Buck is likely to strengthen against the British Pound. Moreover, no releases on the UK economy are anticipated today.
David Starkey, market analyst from Cambridge Mercentile, said that the BoE is most likely going to leave the rates unchanged. However, he also mentioned that "there is certainly a bit of dissent amongst the BoE, their chief economist suggested that there could be room for a cut if inflation continues to track negative, while Carney has openly and publicly suggested that the next move is going to be a hike." The analyst also gives his prospects for the near future, saying that "dissent is probably good, the BoE is going to be analysing the situation closely, the majority of the members still lean towards a hike, one descending voice does not suggest that it is going to be a cut in the near term."
GBP/USD keeps consolidating
The Sterling touched the 1.47 level on Wednesday, but bounced right back. By the end of the day the GPB/USD pair was already at 1.4827. On Thursday we expect a decline, unless the US fundamentals disappoint and weigh on the Greenback like yesterday. The losses should be limited by the weekly PP, while the technical studies remain mixed on the daily time-frame.
Daily chart
The GBP/USD pair formed something similar to a rounding bottom over the past several days. The pattern suggests an upward momentum for the given currency pair. Indeed, the Sterling is seen gaining strength against the US Dollar; however, it might still turn into a cup and handle, as the pair is expected to decline today and build ground for the handle.
Hourly chart
Bears dominate the market
Market sentiment among SWFX traders worsened, as the portion of long positions fell by one percentage point, and at the moment they account for 41%. At the same time, the buy orders take up the major part of the market, namely 63% of it (previously 46%).
Market sentiment of SAXO Group traders deteriorated further, as today 59% of all positions are short (previously 58%). Meanwhile, the equilibrium of OANDA traders' sentiment was disturbed, as long positions added one percentage point today.
Spreads (avg, pip) / Trading volume / Volatility
14% of traders see the British currency at 1.44-1.46 in three months
The mean forecast for July 16 suggests the Sterling will cost 1.4868 dollars. However, only 40% expect the Pound to exceed the 1.50 price level. The most popular price interval is 1.44-1.46, selected by 14% of survey participants, while the second place, 1.42-1.44 price range to be exact, is taken by 13% of more pessimistic traders.
This week Dukascopy traders are more bearish with respect to the British currency's perspectives than before: only 46.2% of all participants expect appreciation of the Sterling.
A trader with a bullish perspective towards the Cable, Likerty, mentioned that the Pound tested a very powerful support at 1.4590 and "as long as it sits above – perspective for notable bullish correction is possible. However, geula4X, another community participant, is short the Sterling. He argues that "GBP/USD seems quite bearish on the daily chart," as "the the price has broken down below the 1.4700 key support." Furthermore, geula4X adds that "March 13 support is now ready to act as resistance on any bounce higher," while "new support lies around 1.4545, the closing price of weekly candle of June 7, 2010."