- The percentage of commands to sell the Pound declined from 63 to 58%
- The distribution between the bulls and bears remains relatively stable
- GBP/USD heads towards the 2013 low at 1.48
- Upcoming events: FOMC Powell Speech, US Housing Market Index
The British Pound dragged behind its counterparts yesterday, losing 0.61% relative to the loonie and 0.57% relative to the Euro, though the changes in other crosses were rather insignificant, between -0.12 and -0.25%. The only expection was Sterling's performance in CHF/JPY pair, where the currency rose as much as 2.11%.
UK house prices rebounded unexpectedly in January after falling in the preceding two months as demand from first-time buyers rose due to stamp duty changes, while the supply continued to lag behind, according to Rightmove. The average asking price increased 1.4% in January, following the 2.2% decline a month earlier, translating into annual advance of 8.2%. However, one of the UK's biggest mortgage lenders expect that the housing market will slow down throughout this year due to the general election in May and mortgage restrictions, which will impact the sentiment, eventually resulting in smaller number of transactions compared to the previous year. Concerning the demand for mortgages, the latest Bank of England credit report revealed demand from British consumers for secured loans for house purchases had fallen markedly in the final three-month period of 2014, but major lenders predicted a slight bounce back in the upcoming three months.
Elsewhere, the think-tank E&Y ITEM Club said very low inflation will push the first interest rate hike by the Bank of England to 2016 and help provide a renewed momentum in the property market. Data from the Office for National Statistics revealed last week that Britain's inflation slowed further to a historic low of 0.5%, considerably below the central bank's 2% inflation goal.
Euro zone news pose a threat
Today there are no risk events directly related to GBP/USD. Neither the speech of Federal Reserve Governor Jerome Powell nor the Housing Market Index release is likely to have a noticeable effect on the currency pair. However, we might still see an increase in the volatility around 10 am GMT because of the German ZEW Economic Sentiment.
GBP/USD closes in on 1.50
Simon Smith, Chief Economist at FXPro, advises not overestimate bullish potential of the US Dollar in 2015. According to him, "we will see Dollar strength through the year, but it's going to be a very difficult year in terms of trends".
As for the Sterling itself, Charles Purdy, CEO of Smart Currency Exchange, sees weakness in the nearest future, arguing that "the UK election will count against Sterling" in terms of "higher levels of uncertainty". According to the analyst, GBP/USD is likely to fall to 1.50 and then to 1.46 in one and three months, respectively. However, in a year he expects the exchange rate to recover to 1.48, after the BoE hikes the interest rates in the second half of 2015.
Daily chart
Having breached the monthly S3, the Cable keeps slowly grinding lower, and it may soon reach 1.50. The last time the pair approached this level, GBP/USD surged more than 200 pips in the next four days. Nevertheless, as long as the major down-trend (currently at 1.5450) stays intact, the bearish outlook will remain valid. We expect the Sterling to slide down to the 2013 low at 1.48 in the next few weeks.
Hourly chart
UK currency slowly regains attractiveness
The distribution between the bulls and bears remains relatively stable — 59% of open positions are long and 41% are short. The sentiment towards the Sterling is improving according to the other brokers as well, such as OANDA and SAXO Bank, where the shares of long positions are at 57 and 63%, respectively.
The percentage of commands to sell the Pound in the radius of 100 pips from the spot price declined from 63 to 58%, as we are currently moving away from the resistance.