- Percentage of buy commands increased from 39 to 42%
- Bullish market sentiment among SWFX traders slightly weakened, as 54% of market participants are long the British currency
- 16% of traders see GBP/USD at 1.54/1.56 in three months
- Closest resistance is located at 1.4900, represented by the weekly S1, while the nearest support rests at 1.4808, the 2013 low
- Upcoming events: US PPI and Core PPI, US Preliminary UoM Consumer Sentiment, UK MPC Member Haldane Speech, US Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, US NAHB Housing Market Index
The Sterling declined against all major peers without exceptions. The Pound slumped the most versus the Aussie and the Kiwi, 1.78% and 1.58%, respectively. However, a smaller loss of 0.31% was recorded against the Greenback.
Britain's trade deficit shrank in January to its lowest level since mid-2013, due to a surge of exports of services as well as decline in oil prices. According to the Office for National Statistics, the total deficit shrank to 616 million pounds from 2.14 billion pounds in December. This was caused by the highest surplus in services since records began 17 years ago. Britain's trade in services recorded its monthly surplus of 7.80 billion pounds in January with exports rising to a record high of just over 18 billion pounds. The UK is traditionally a net exporter of services, partly due to the international influence of the City of London and its financial industry. The gap in trade was also appeared to be smaller due to a decline in the value of imported goods Britain, which recorded the lowest level in more than four years, in large part due to cheaper imports of oil. Imports of crude were 2.2 billion pounds in January, their lowest level since May 2009. The deficit in goods trade also narrowed to 8.41 billion pounds, the smallest value since March of last year.
A separate report by the Royal Institution of Chartered Surveyors, showed British house prices grew more than expected in February, adding to signs an increasing shortage of properties may mark the end of a slowdown in the housing market. RICS monthly house price balance came in at +14 in the reported month, doubling from +7 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 PPI and Preliminary UoM Consumer Sentiment to underpin Dollar
Today the US PPI is expected to increase by 0.2%, compared to a decline of 0.8% previously. Moreover, the Preliminary Consumer Sentiment is also awaited to improve. Both data releases are to have high impact on the US Dollar and are likely to significantly strengthen it versus the Sterling.
GBP/USD extends decline; near 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."
Despite deteriorated US Retail Sales data on Thursday, the Sterling still edged down versus the Buck. Although the GBP/USD pair failed to reach the 2013 low, half of the road has been already covered, as the Sterling ended the trading day at 1.4882. While the technical indicators remain neutral, the US PPI, as well as the Preliminary Consumer Sentiment, is expected to improve, thus potentially putting even more pressure of the Pound. If the data do not disappoint again, we could possibly see Cable at the 2013 low and, perhaps, even lower.
Daily chart
Even though a correction of the GBP/USD pair was anticipated, and it even seemed to have started at the end of Thursday, downward momentum is seen today. The Sterling leisurely approaches the 2013 low at 1.4808 and has a solid chance to even cross it if the US PPI data do not disappoint later today.
Hourly chart
Majority of traders remain bullish
Bullish market sentiment among SWFX traders slightly weakened, as 54% of market participants are long the British currency. The percentage of purchase commands, on the other hand, increased from 39 to 42%.
SAXO Group clients lost confidence in the Pound, as 52% of market participants are short the Sterling. OANDA traders, on the other hand, maintain their bullish outlook towards the Cable, as 54% of all positions are long.
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."