- Portion of buy orders increased, with 39% of all commands now set to acquire the Sterling
- Still more bulls among SWFX traders, as 55% of all positions are long
- 16% of traders see GBP/USD at 1.54/1.56 in three months
- Closest resistance is located at 1.4951, represented by the January low, while the nearest support rests at 1.4900, the weekly S1
- Upcoming events: US Core Retail Sales, US Unemployment Claims, US Business Inventories
The Pound declined against almost all currencies; however, some gains were detected against the Euro. The Sterling lost 1.18% versus the Kiwi and 0.93% versus the Greenback. Nonetheless, the British currency appreciated 0.48% against the Euro, whereas it remained relatively unchanged against the Swiss Franc.
Both manufacturing and industrial output unexpectedly dropped in January, adding to concerns of the UK economy's deceleration. According to the Office for National Statistics, manufacturing production declined 0.5% between December and January, following the 0.1% increase. This was due to a 9.5% fall in electronics, the biggest in 13 years. Over the three months to January, a less volatile gauge of output, manufacturing rose 0.4% compared with the preceding three months. Total industrial production, which makes up about 15% of the UK economic output, slid 0.1% in the reported month, whereas economists had expected a 0.2% gain. Measured on an annual basis, industrial output advanced 1.3%. Weaker extraction of oil and gas has been one of the biggest drags in the last four months due to lengthy maintenance works of some of the largest oil rigs. In January, however, mining and quarrying was among the largest upward drivers, rising 2%. In yearly terms, industrial production increased 1.9%.
The ONS also said that despite the total GDP being well above the pre-crisis levels, both manufacturing and total industrial production remained 4.8% and 10.4% below those levels, respectively, in January.
Nicholas Ebisch, Corporate Account Manager at Caxton FX, agrees with Mark Carney's statement before the House of Lords Economic Affairs Committee that "at this point it would be foolish for the BoE to cut interest rates," since it would add "unnecessary volatility to inflation." Ebisch also mentioned that the BoE Governor's use of the word 'foolish' shows that "the MPC is firmly against the interest rate raise at this time."
US Core Retail Sales and Unemployment Claims expected to weigh on the Cable
Today the US Core Retails Sales are expected to increase, while the US Unemployment rate is likely to fall, thus, the Greenback might outperform the Sterling.
GBP/USD edges to 2013 low
Nicholas Ebisch, talking about the price level in the United Kingdom, said that "the latest BoE inflation outlook forecasts inflation to drop to near zero during mid-2015 and return to around 1% near the end of the year." He added that "the forecast for 2016 is for inflation to continue rising to 1.5% or 2%," namely the central bank's target. According to the analyst, if "wage growth keeps up pace with inflation, we could potentially see robust growth in the UK within a year or so."
The GBP/USD pair slumped on Wednesday, due to UK Manufacturing Production data turning out worse than the expected figure. As a result, the Sterling dropped beyond the January low of 1.4951 and tested the support around 1.4900, which stopped the British currency from falling deeper. The Pound edged closer towards the 2013 low and the gap might narrow down even more after today's US Core Retail Sales data. Even though the technical studies are mixed, the pair is likely to decline further and reach the 2013 low at 1.4808.
Daily chart
GBP/USD broke out of the descending triangle to the downside and fell through the Jan low. The Sterling may now start a correction, but the rally is likely to be halted at 1.5030, where the currency is going to meet the falling resistance trend-line. The US Retail Sales may contribute to a stronger Dollar as well.
Hourly chart
Slightly more bulls among traders
There are still more bulls among SWFX traders, as 55% of all positions are long. At the same time, the portion of buy orders increased, with 39% of all commands now set to acquire the Sterling.
Market participants at SAXO Group remains bullish, although close to equilibrium, as 52% of all positions are long. The OANDA traders' outlook towards the Cable is similar, with 53% of longs.
Spreads (avg, pip) / Trading volume / Volatility
16% of traders see GBP/USD at 1.54/1.56 in three months
In a week's time the sentiment towards the currency pair did not change, as still almost 69% of traders predict the Pound to rise, while last week the idea was supported by 60% of surveyed Dukascopy Community members.
One of the survey participants, michaliero, supports the positive outlook, as in his opinion "the Pound has better fundamental view than the Euro and could try to test 1.54 level in a few days." At the same time, geula4x is a Sterling-bear. According to him, "the previous support area, 1.5200, for the February 6-12, is now resistance, while support lies around the 1.4950 level."