- The number of purchase orders remains unchanged at 61%
- Positions are equally divided between the long and the short ones
- 18% 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 weekly R1 at 1.5744
- The nearest support rests at 1.5653, represented by the weekly PP
- Upcoming events today: US Core Durable Goods Orders and Durable Goods Orders, FOMC Member Dudley Speech, US Crude Oil Inventories
The Sterling appreciated against some major peers, but also declined against the others on Tuesday. The Pound lost the most against the Yen (0.67%) and the Kiwi (0.50%), following with lesser declines of 0.41% and 0.18% against the Greenback and the Euro, respectively. Nevertheless, the British currency added 0.64% versus the Aussie and 0.22% versus the Swissie, while remaining relatively unchanged against the Loonie, gaining 0.04%.
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 Durable Goods Orders and FOMC Member Dudley Speech
For the third consecutive day there will be no significant economic data releases concerning the UK economy. From the US side, the most important event is the Durable Goods Orders. The given event is important, as it attracts large investments, which are sensitive to the US economic situation. The forecast stands at -0.4%, down from 3.4%; a rather sharp decline is expected, which is likely to weigh on the Greenback. Furthermore, the New York's Fed official is scheduled to speak today at 14:00 PM GMT, who might provide some hints concerning the Fed's monetary policy, especially the interest rate hike. Volatility is expected during his speech.
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 stuck around 1.57 once again
Despite reaching a fresh two-month high yesterday, the Cable returned under the 1.57 psychological level. The GBP/USD failed to hold the gains, due to the Bollinger band providing immediate resistance, which might be reached again today. From below the pair remains supported by a strong cluster, located around the trend-line, while technical studies are now showing bullish signs. The rally might well extend towards the Bollinger band, and possibly even further if the US fundamentals disappoint today.
Daily chart
On the hourly chart, the Cable is seen consolidating around 1.57 major level, after having slumped on Tuesday. Risks of reaching the support trend-line persist; however, the trend-line and the 200-hour SMA should hold the losses and could even cause a rebound.
Hourly chart
Bulls keep edging closer to equilibrium
Positions are equally divided between the long and the short ones today, whereas the number of purchase orders remains unchanged at 61%.
Other market participants have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment improved today, as 60% their positions are now short (previously 62%). At the same time, among OANDA traders, bulls gained more numbers, with 58% of positions being long, compared to 55% previously.
Spreads (avg, pip) / Trading volume / Volatility
18% 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 26 and August 26, 18% 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 the 1.50-1.52 price interval, selected by 11% of the voters. Meanwhile, the mean forecast for November 26 stands at 1.5739.
Nevertheless, the next trading week assumes the Sterling will rally further, as now almost 82% of Dukascopy Community members are strongly positive with respect to this currency. The mean estimate for Aug 28 is placed around 1.5750, or some 50 pips above the previous Friday's closing price.
Aslamhammad, a trader on the bullish side of the sentiment, assumes the Sterling to outperform the Buck, as the price has been ranging between 1.56 and 1.57 last week. He expects the GBP/USD to close higher this Friday, as the second quarter GDP data from UK was rather good, so it should boost the Sterling to the upside again. Nevertheless, on the lesser side of the traders, namely on the bearish one, megajorko said that "there was a very strong corrective move up to 1.57, which was opposite to EUR movement." He also mentioned that presently the EUR and GBP are in anti-correlation (EUR/GBP is going down), but the upcoming strong US events will push the Cable lower again.