- Number of buy orders plunged 42 percentage points, and now they account for only 36% of the market
- The sentiment has reached a perfect equilibrium
- 15% of traders see GBP/USD at 1.54/1.56 in three months
- Closest resistance is located at 1.4760, represented by the monthly S2, while nearest support rests around 1.4580, represented by the weekly PP and Bollinger band
- Upcoming events: UK Public Sector Net Borrowing, US FOMC Member Lockhart and Evans Speeches, UK CBI Industrial Order Expectations, US Existing Home Sales
The Sterling tumbled down all currencies, with the exception of the Euro and Aussie. The Pound lost 1.50% and 0.96% versus the Buck and Japanese Yen, respectively. Nevertheless, a 0.38% gain was recorded with respect to the Euro, while the British currency remained relatively unchanged (added 0.12%) against the Aussie.
Mortgage lending in the United Kingdom declined to its lowest level in almost two years, namely since April 2013, as the property market in the country seems to be undergoing a correction phase. Halifax survey has recently shown a decrease in UK house prices of 0.3% between January and February. However, the overall situation cannot be named as dramatic, while growing economy and low inflation will increase activity of both lenders and mortgage takers to engage into new deals on the housing credit market. According to data from the Council of Mortgage Lenders, in total the UK financial institutions lent 13.4 billion pounds in February of this year, down 9% both on monthly and annual basis. Even weaker indicator was last time registered as early as April 2013 at 12.4 billion pounds, when UK property market has only started expanding considerably and economy picked up after the double-dip recession.
At the same time, some market analysts are pointing on seasonality of the data, underlying traditional weakness during the month of February and at the start of the year in general. They also add that real incomes in Britain became rising after four years of downward change and employment is gaining further momentum. Accompanied by recent stamp duty reforms in the country, experts suggest lending is going to rebound during upcoming months.
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."
UK Public Sector Net Borrowing and FOMC Member Speeches
The Office for National Statistics is going to publish the data on the UK Public Sector Net Borrowing, which is forecast to worsen today, thus pressuring the Sterling against the US Dollar. Furthermore, two FOMC Member Speeches are expected later today, and hawkish statements might strengthen the Greenback.
David Starkey, Senior Market Analyst from Cambridge Mercantile Group, commenting on the Fed removing 'patience' from Fed's interest rate guidance, said that "Yellen lowered expectation for GDP, inflation, and as such – the trajectory of Fed rates." He said that "in December the last economic projections were that the Fed rates would be over 1% at the end of 2015." However, the most recent data showed the Fed now only expects rates to go as high as 0.625% by the end of 2015. "As suc,h the overall result was Dollar-negative," he said.
GBP/USD undergoes a correction
As expected, the Sterling bounced back on Thursday and almost completely erased Wednesday's gains. The pair behaved in accordance with the forecast, as it once again reached the 2013 low at 1.4808. Moreover, the Pound edged even lower and settled beneath the monthly S2 at 1.4760. In aggregate the technical studies are pointing directly south, strongly suggesting further slump in the Pound's value. Consequently, we expect a decline towards the weekly S1 and lower Bollinger band around 1.4558.
Daily chart
The GBP/USD pair did not remain above the down-trend line for long, as the Sterling slumped yesterday. The losses extended back to the 2013 low and even further. The Pound attempted to rebound, but the efforts were in vain, and the bearish pressure is expected to persist.
Hourly chart
Perfectly neutral sentiment
Once more the sentiment has reached a perfect equilibrium, whereas the number of buy orders plunged 42 percentage points, and now they account for only 36% of the market.
The SAXO Group trader's sentiment had its tide turned, as 52% of all positions are now short. OANDA market participants, on the other hand, retain confidence with respect to the British currency, as 56% of open positions are long.
Spreads (avg, pip) / Trading volume / Volatility
15% of traders see GBP/USD at 1.54/1.56 in three months
Comparing to the preceding week, the sentiment on this currency pair changed more to the downside; however, the traders' votes are divided equally. Now 50% of traders predict the Sterling to lose in value, while during the last week, this scenario was supported by 31% of Dukascopy traders. The median estimate for March 20 is placed around the 1.4890 mark.
One of the survey participants, joeH, thinks that the Sterling is oversold and is located next to a good support cluster. He commented on this, saying that "if the price does not drop through support," he would expect the rate to target 1.5229; however, he also reckons that the Pound has the potential to climb even higher. On the other hand, Samurai, another survey participant, thinks that the British Pound will be pressured by the strong Greenback. He argued for this outlook by saying that "there were no relevant data coming from the UK which may affect the British Pound."