- The portion of buy orders in the 100-pip range from the spot declined from 54% to 39%
- The gap between the long and short positions slightly narrowed, as 58% of traders are optimistic towards the Sterling
- 16% of traders see either 1.54/1.56 in three months
- Closest resistance rests at 1.5289, represented by the 55-day SMA, while the nearest support remains unchanged at 1.5219, represented by the weekly S2
- Upcoming events: US Non-Farm Employment Change, US Unemployment Rate, US Average Hourly Earnings, US Trade Balance
The Sterling strengthened against all its major peers, except for the US Dollar. The Pound lost 0.16% versus the Greenback, but gained 1.27% versus the Kiwi, 0.94% versus the Swiss Franc.
The Bank of England opted to keep the interest rate unchanged in March, marking six years since policy makers reduced borrowing costs to all-time low levels to help the UK economy recover from a deep recession. The Monetary Policy Committee maintained the central bank's benchmark rate at 0.5% and agreed to leave the size of the bond portfolio unchanged at 375 billion pounds. While the economic recovery brings prospects of rate hikes closer, annual inflation at 0.3% and the likelihood of an outright decline in prices in coming months put little pressure on central bankers to act. Falling oil prices and the effect of late 2013 and early 2014 Pound's appreciation are the key two downward pressures on consumer prices. Besides, prospect of a very low near-term inflation led the MPC members to unite on rate vote in January after five months of a disagreement at the panel.
Yet the British economy is growing robustly, supported largely by solid consumer spending. Economic output increased 2.6% in 2014 and BoE policy makers expect low inflation to boost household incomes and fuel growth this year. Investors expect the central bank to finally hike interest rates early in 2016. However, some officials have pointed they may favour raising rates even earlier, probably before the year end.
John Redford, senior FX consultant at Worldwide Currencies, talks about the one-month outlook on the GBP/USD: "According to what the reaction is after the elections in May, I think that the Dollar should ultimately spare a little bit on the firm side, it is almost as I would much rather be short ahead of 1.57 along approaching 1.50, because I think it could actually see that trading range."
Focus on the US labour market
There are no updated scheduled on the United Kingdom neither today, nor on Monday. The US Non-Farm Employment rate is likely to decline, thus putting pressure on the Greenback. However, the Unemployment Rate is expected to improve, which might have the opposite effect on the US Dollar.
GBP/USD slumps for the fourth day
John Redford also speaks about the GBP/USD forecast after the election, when "we could see a move to 1.57, potentially 1.60." Still, he sees "the general stronger Dollar thing will continue over period."
On Thursday, the GBP/USD pair did not surprise with its behaviour, as it slumped again for the fourth consecutive day. The Sterling tested the weekly S2 support at 1.5219 but failed to breach it. Ultimately, the pair ended the trading day at 1.5236. Regardless of the technical studies showing neutral signs, the currency is still likely to plunge for the fifth day. Closest resistance is represented by the weekly S2, as the US data is not expected to be strong enough to push the Pound lower.
Daily chart
The hourly chart shows rather poor performance of the Pound since the beginning of the day. Even though the currency rallied at first, eventually it followed with a large slump down to the daily S1 at 1.5212. GBP/USD is now trying to breach this support, although, the end-result mostly depends on the US data release later today.
Hourly chart
Market sentiment each day closer towards equilibrium
The gap between the long and short positions slightly narrowed, as 58% of traders remain positive towards the Sterling. At the same time, the portion of buy orders in the 100-pip range from the spot declined from 54% to 39%.
The sentiment among the SAXO Bank traders is more bullish than yesterday, as 55% of all positions are now long, and OANDA traders are as positive towards the Sterling as SAXO Bank ones, with 55% of all positions being long.
Spreads (avg, pip) / Trading volume / Volatility
16% of traders see either 1.54/1.56 in three months
This week experienced minor changes in the market preference, as now bullish votes take up almost 60% of all responses. The average market expectation for March 6 is located around the 1.5530 level.
Geula4x is expecting a bullish scenario regarding the GBP/USD pair, as in his opinion, price has been moving in an upward channel for a month now. At the same time, Amaunat holds a bearish view on the pair, reasoning that "divergence is drawing on the RSI on H4," while "the price is in current trend channel" and "breaking the bottom should maintain the bearish market."