- Percentage of commands to buy the Sterling decreased dramatically from 73% to only 45%
- SWFX market participants remain equally divided between the bulls and bears
- 17% of traders still see the pair between 1.54 and 1.56 in three months
- Upcoming events: US Initial and Continuing Jobless Claims and Philadelphia Fed Manufacturing Survey, UK Retail Sales and Public Sector Net borrowing.
Pound's performance over the night was outstanding, as it appreciated against the majority of other currencies. The currency gained 1.1% against the Swiss Franc and 1.07% versus the Canadian Dollar.
Although Bank of England policy makers voted unanimously for the second consecutive month to keep monetary policy intact, however, difference in views of central bankers re-emerged. Two officials appeared to expect an increase in Bank Rate later in the year, while one member said that the next move is more likely to be a loosening rather than tightening. However, the minutes revealed that all MPC members expect interest rates to rise over the course of next three years. Last week the BoE published new forecasts that showed the UK economy will enjoy its quickest growth since 2006 this year, boosted by lower oil prices, and Governor Mark Carney said it was more likely to raise rates than loosen policy.
Meanwhile, Britain's unemployment rate unexpectedly dropped while wage growth soared and hit the highest level in 18 months. UK jobless rate declined to 5.7% in December, as employment reached another record high, the Office for National Statistics said. Employment surged by 103,000 to close to 31 million, the highest level since records began in 1971. Meanwhile, the number of people applying for Jobseeker's Allowance dropped 38,600 in January to 823,000, the 27th consecutive monthly fall. Also, total pay growth, which includes bonuses, climbed above expectations to 2.1%, up from 1.8% recorded in the preceding month. Excluding bonuses, earnings rose by 1.7%.
Bank of England's Governor, Mark Carney, promised, that the UK would hit the Central Bank's 2% target within two years time, which is sooner than previously forecast. He also mentioned that current period of falling prices was temporary and fundamentally distinct phenomenon from deflation.
Unemployment Claims to decline
Although not many releases are scheduled for today, GBP/USD is likely to exhibit increased sensitivity to the US Initial and Continuing Jobless Claims and Philadelphia Fed Manufacturing Survey that are to be published between 13:30 and 15:30 GMT. Tomorrow morning the focus of the market should shift toward the UK economy amid the Retail Sales and Public Sector Net borrowing reports.
GBP/USD poised for more gains
Mark Carney, Bank of England Governor, pre-warned consumers that a negative inflation rate will be temporary and the UK will not experience deflation. "Enjoy it while it lasts" – Mark Carney said last week.
The Sterling has regained momentum after Wednesday's outstanding UK Claimant Count Change data release. The pair erased losses for the previous two days and ended the trading day just below the monthly R1. As of now, the GBP/USD cross breached that resistance level and is currently traded between the monthly and weekly R1s, around 1.5457.
Daily chart
Looking at the hourly chart, the Pound is seen extending gains with poor attempts to decline. Technical indicators are all showing bullish signs, suggesting that the pair will continue growing. And for now the Sterling retains bullish momentum despite trading next to the upper Bollinger band, while the pair is edging closer to the weekly R1 at 1.5471.
Hourly chart
Sentiment remains neutral
Market sentiment among SWFX participants remains in equilibrium between bulls and bears. However, the number of pending orders in the 100-pip range to acquire the Sterling decreased dramatically. Over the night their share went down from 73% to only 45%.
Although not as strong as yesterday, sentiment among the SAXO Bank clients is still bullish, having dropped to 53%. OANDA traders have lost some confidence in the Cable as well, as 60% of market participants are to profit from Sterling's appreciation.
Spreads (avg, pip) / Trading volume / Volatility
17% of traders still see 1.54/1.56 in three months
This week traders' expectations changed dramatically, with 70% of Dukascopy Community members predicting the pair to advance. Alongside, the average forecast for the end of the week is placed around the 1.537 level.
A proponent of a bullish scenario, al_dcdemo, reckons that "the pair is likely to correct further towards 1.55 level", adding that reasons for this are "hawkish inflation report and encouraging data late from UK." Meanwhile, Daytrader21 holds a bearish view on the pair, expecting the Dollar to outperform the Pound because of the latest BoE's inflation report, after which inflation should become negative, pressuring the GBP/USD pair to the downside.