- The number of purchase orders dropped from 51 to 47%
- 44% of traders are now long the Pound, compared to 43% yesterday
- 13% of traders expect the Pound to cost between 1.44 and 1.46 dollars after a three month period
- Nearest support lies around 1.5403, represented by the weekly R2, while closest resistance rests at 1.5464, namely the Bollinger band
- Upcoming events: US Continuing and Initial Jobless Claims, US Personal Income and Spending, Chicago Purchasing Managers' Index, UK Net Lending to Individuals
The Sterling performed well against most major peers, with exception against the Euro and the Swissie. The Pound added 1.11% versus the Kiwi, following with 0.83% and 0.78% gains versus the Aussie and the Yen, respectively. Significant losses against the Swiss Franc (1.07%) and the Euro (0.69%) were detected over the day.
Britain's economy slowed more sharply than expected in the beginning of the year, challenging UK's Prime Minister David Cameron, who heads for re-election campaign next week. Gross domestic product grew by 0.3% in the first quarter, according to the Office for National Statistics, the slowest quarterly growth since the end of 2012. Economists, however, had expected a marginal slowdown to 0.5%. The main downside drag came from the UK services sector, which accounts for 78.4% of the nation's economic output. The sector expanded 0.5% compared with the last quarter's increase of 0.9%. In addition to that, production declined for the first time since the fourth quarter of 2012, posting a drop of 0.1%.
Measured on an annual basis, GDP was 2.4% higher in the first quarter. It is now 4.0% bigger than its peak before the financial crisis, and 8.4% larger than when Cameron's Conservative-led coalition came to power in May 2010. The first estimate is based on less than 50% of all the data available and includes only figures on the output side of total GDP. Therefore, the headline figure is subject to revisions and economists warn against reading too much into the data. Yet, despite disappointing figures, most economists expect the economy to keep its momentum in 2015 following last year's growth of 2.8%, which was the strongest among the Group of Seven industrialised nations.
Francesca Panelli an analyst from Oxford Analytica, gives her opinion on the overall health of the UK. She said that "uncertainty related to the upcoming UK election may weigh down the services sector, because it's a very sensitive sector to political development." Francesca expects the UK economic growth to pick up later in the year. She elaborated that "the slowdown in services should prove transitory, we had better evidence from higher frequency PMI over the first quarter of the year, and so I think momentum could improve ahead."
Jamie Jemmeson, head of trading at Global Reach Partners, talks about the upcoming elections in the UK. He says that the UK is sailing into murky waters right now, with no clear definition of what is going to happen next. Jamie adds that this is also going to lead to more Sterling volatility, so the investor has to be cautious.
He also gave his prospects on the effect the elections might have on the British currency: "I think that generally in terms of you looking at Sterling volatility, a Tory Government would be more positive for the Pound." He still mentioned that "Generally, if you look at historically how the Pound has re-answered, it prefers a Tory Government."
US Jobless Claims
The US Unemployment Claims are expected to reduce, which is a good sign and should strengthen the US Dollar. Nevertheless, the US showed a lot of worse-than-expected data recently, the pattern might repeat itself today. As a result, the Sterling has a chance of growing stronger against the Greenback.
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 reaches two-month high
The Sterling almost fell in line with expectations, as it appreciated against the US Dollar yesterday. A hike towards the 200-day SMA took place, but the Cable still settled slightly lower. The resistance cluster around 1.54 failed to prevent the pair's climb, as it stabilised at 1.5426. Technical studies suggest the Sterling will climb up again today; however, a fall might occur if the US fundamentals surprise with good figures. The 200-day SMA should stop the surge at 1.5490, while a slide back towards 1.53 is the worst-case scenario.
Daily chart
After extending the gains for one more day, the Cable was able to overcome the 1.54 barrier. However, a slight correction started to take place afterwards, but the 1.54 psychological level is now providing solid support, preventing the Sterling from edging lower. A bounce back up is expected by the end of the day.
Hourly chart
Market sentiment slightly stronger, but remains bearish
Bulls slightly grew in numbers, as 44% of traders are now long the Pound, compared to 43% yesterday. The number of purchase orders, on the other hand, dropped from 51 to 47%.
SAXO Group traders' sentiment remains bearish, although the share of longs added six percentage point up to 38%. Meanwhile, OANDA traders' sentiment shifted to the bullish side, with 51% of all positions now being long.
Spreads (avg, pip) / Trading volume / Volatility
13% of traders expect the Pound to cost between 1.44 and 1.46 dollars after a three month period
The mean forecast for July 30 is 1.5007, while only 48% of survey participants expect the Sterling to cost more than 1.50 dollars in three months. The most popular price interval is 1.44-1.46, chosen by 13% of the surveyed. The second popular choice was divided between two price ranges: 1.46-1.48 and 1.52-1.54, selected by 11% of the voters each.
Concerning present week, the sentiment experienced major changes, as now vast majority of votes are positive on the GBP/USD currency pair, namely 80% of them.
This week, aslamhammad, an active community member, changed his outlook towards the Cable to a negative one. In his opinion "the Pound is having a resistance around 1.52, so below that it should head lower to 1.51, and then break 1.51 level." This was the main argument that resulted in aslamhammad's change of heart. Meanwhile, a trader with a bullish perspective, geula4x, said that GBP/USD seems very bullish on the daily chart. He backed his statement by commenting that "price has been moving sharply higher and broke above the 1.50 big round number, previous resistance area." The reason for this was that the 1.50 area has been capping price multiple times since March 18, therefore, geula4x assumes that the strong break above it suggests a continuation towards 1.55, the next resistance area.