- The portion of buy orders declined from 68 to 61%
- Bulls take up 49% of the market
- 19% of the poll participants expect the British Pound to cost between 1.58 and 1.60 after a three-month period
- Immediate resistance lies in face of the Bollinger band at 1.5773
- The nearest support rests at 1.5744, represented by the weekly R1
- Upcoming events today: US HPI, US Markit Services PMI, US CB Consumer Confidence, US New Home Sales
The UK Pound experienced mixed performance over the day, appreciating against commodity currencies, including the US Dollar, and also declining against other major peers. Amid a broadly strong Yen, the Sterling lost 1.81% against it, following with a 1.23% decline versus the Euro and 0.97% versus the Swissie. Nevertheless, the British currency gained 3.08% against the Kiwi, 1.63% against the Aussie and 1.05% versus the Loonie, following with an also significant gain of 0.54% versus the US Dollar.
The UK economy is predicted to remain resilient this year supported by "twin engine" of increased household spending and strong investment growth, according to the Confederation of British Industry, which forecasts an interest rate hike in early 2016. The CBI upgraded its growth outlook for the British economy. The business lobbying organisation now expects the UK economy to expand 2.6% this year up from 2.4% predicted in June. The CBI also improved its forecast for 2016, estimating GDP growth of 2.8%, up from 2.5%. Quarterly growth is anticipated to increase at an average pace of 0.7% through to the end of 2016. Signs of improving productivity in the beginning of 2015 that are feeding through to higher wage growth are part of a combination of factors that led to the revision. Declining commodity prices are also giving a boost to household spending, with business investment likely to remain healthy, the CBI said.
However, there are international headwinds. China's economic slowdown will hinder global growth, while a strengthening Sterling will undermine UK export competitiveness. Chancellor of the Exchequer George Osborne also supported this view by saying that the British economy is vulnerable to international stocks, underlining growing concerns among investors and policy makers as a sell-off in China's stock market spreads worldwide.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
US CB Consumer Confidence
Tuesday also holds no events from the UK side, thus, the focus on fundamental data remains unchanged since yesterday, namely on the CB Consumer Confidence due today at 14:00 PM GMT. The Consumer Confidence shows the survey results of households, that rated the current and future economic and business conditions. Improvements are expected, suggesting the overall situation in the US is stabilising. To back this up, the New Home Sales, which are due at the same, are also forecasted to rise, compared to the preceding release.
Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD keeps trade at two-month high
The Sterling skyrocketed against the US Dollar on Monday, amid the market turmoil and the Fed's September rate hike being postponed. Even though volatility reached the 1.58 major level, the pair still closed at 1.5759, just above the immediate resistance cluster. The situation appears to have calmed down today, as the Cable is stuck between the weekly R1 and the Bollinger band. Focus shifted back to the fundamental data, which is likely to cause the GBP/USD to break out of this cage in either direction. Technical studies retain mixed signals, suggesting the pair is to remain flat.
Daily chart
The Cable rebounded from the 200-hour SMA and the support trend-line yesterday, allowing the pair to reach the 1.58 psychological level. However, momentum kept slowing down closer to day's end, resulting in a consolidation today. A correction is likely to occur, as the pair could gravitate back towards the trend-line. Nonetheless, the 1.57 level first needs to be crossed in order to validate the decline towards the support line.
Hourly chart
Bulls keep edging closer to equilibrium
Market sentiment remains unchanged, with bulls taking up 49% of the market. The portion of buy orders declined from 68 to 61%.
Other market participants have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment worsened even more, as 62% their positions are now short (previously 54%). At the same time, among OANDA traders, bulls and bears broke out of the perfect equilibrium, with 55% of positions being long.
Spreads (avg, pip) / Trading volume / Volatility
19% of the poll participants expect the British Pound to cost between 1.58 and 1.60 dollars after a three-month period
According to the survey conducted between July 25 and August 25, 19% of traders assume the GBP/USD currency pair will cost between 1.58 and 1.60 dollars within three months. However, the second place is now taken by three price intervals: 1.50-1.52, 1.52-1.54 and 1.60-1.62, all three selected by 11% of the voters. The mean forecast for November 25, on the other hand, is 1.5725.