- Number of buy orders accounts for only 34% of the total, less than yesterday's 35
- SWFX traders are equally divided between the bulls and bears
- 15% of traders see GBP/USD between 1.54 and 1.56 in three months
- Closest resistance is located at 1.4859, represented by the weekly PP, while nearest support rests at 1.4808, the 2013 low
- Upcoming events: US Building Permits, US Housing Starts, US Treasury Sec Lew Speech, UK Average Earnings Index, UK Claimant Count Change, UK MPC Official Bank Rate Votes, UK MPC Asset Purchase Facility Votes, UK Unemployment Rate, UK Annual Budget Release, US FOMC Statement
Over the day the Sterling appreciated against most currencies, with exception of the Euro. The Pound added the most against the Swiss Franc, 0.78%, while more moderate gains of 0.58% and 0.52% were recorded versus the Greenback and Japanese Yen, respectively. Meanwhile, the British currency remained relatively unchanged against the Euro (-0.09%).
The Conference Board Leading Economic Index rose 0.2% in January, following zero growth in the preceding month. The CB's measure of current economic activity climbed 0.1% in January to 105.1 after the 0.2% increase a month earlier. The data suggested that economic growth in the UK will continue at a moderate pace and is unlikely to accelerate in the near term.
In the meantime, UK average asking house prices climbed 1% between February and March, the slowest growth since 2012 but still close to the June 2014 all-time high, according to the Rightmove House Price Index survey. The average asking price of homes coming up for sale grew by 2,748 pounds to 281,752 pounds – just 30 pounds below the peak reached last June 2014. The annual rate of increase declined to 5.4%, whereas first-time buyer properties are priced 7.6% higher than a year ago. According to the latest Halifax survey, UK house prices fell 0.3% between January and February but less volatile underlying quarterly figure rose 2.6% , the most since September 2014. Mortgage provider Nationwide reported earlier in March that the average asking price of properties had dropped 0.1% between January and February. On an annual basis, house price inflation slowed to 5.7% in February from 6.8% a month before, the sixth month of price growth moderation.
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 Building Permits set increase to strengthen the Greenback
Today the US Building Permits, a high-impact release, are expected to increase, while no UK-related events are scheduled for Tuesday. However, Wednesday is likely to be an interesting day, as significant data for both countries are due tomorrow.
GBP/USD above 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 Sterling did not meet the expectations and climbed up instead of falling further on Monday, amid the poor US data. The Pound went over the 2013 low and tested the weekly PP, before settling at 1.4826. The daily technical indicators are showing bearish signs, suggesting downward momentum for the pair, unless the US building permits come out higher than the consensus. The closest significant support level is at 1.4760, represented by the monthly S2.
Daily chart
After moderate growth through Monday, the Sterling tested the 2013 low, before finally crossing it. Since that period the GBP/USD has been trading in the tight range over 1.4808, and the pattern is unlikely to change before the US data release at 12:30 GMT.
Hourly chart
Sentiment in equilibrium
The SWFX traders are equally divided between the bulls and bears. The number of buy orders accounts for only 34% of the total, less than yesterday's 35%.
SAXO Group clients' sentiment is also in equilibrium, whereas OANDA traders' attitude towards the Cable shifted to the slightly bearish side, with 51% of all positions being short.