- The number of buy orders also declined, from 49% to 40%
- The gap between the long and short positions widened, as 46% of traders now have a positive outlook towards the Sterling
- 16% of traders see GBP/USD at 1.54/1.56 in three months
- Closest resistance is located at 1.4918, represented by the weekly PP, while nearest support rests around 1.4808, at the 2013 low
- Upcoming events: UK Retail Sales, UK FCP Statement, UK CBI Realized Sales, US Unemployment Claims, US FOMC Member Lockhart Speech, UK BOE Gov Carney Speech
The British Pound strengthened against most major peers, with the exception of the Yen and Euro. The Sterling added 0.81% versus the Kiwi and 0.62% versus the Aussie, following with smaller gains relative other currencies. Nonetheless, the Pound declined 0.22% against the Euro and remained relatively unchanged versus the Yen (-0.03%).
The total number of new approvals for receiving mortgages in the United Kingdom increased in February of this year, by reaching the biggest level in five months. All in all, UK banks approved 37,305 new housing loans last month, up from 36,500 registered in the beginning of the year. However, annual data for this indicator continues to disappoint. Judging from year-to-year numbers, released by the British Bankers' Association, approvals for property purchases declined 20.2%, from 46,785 seen in February of the previous year. Alongside, a decrease in total value of new house loans amounted to somewhat lower 16.1%, partly positively offset by an increase in property prices across the country. Data has also showed a slump in a total number of all type of loans approved by British banks, down from 76,938 to 61,361 this February.
At the same time, BBA generally sees optimistic signs that a recovery is beginning to taking place, as consumers take advantage from competitive deals that are available at the moment. Britons are also becoming more confident to make long-term purchasing decisions as economy is getting back on track with the fastest GDP increase among G7 countries. Moreover, the UK government has set out additional plans to support those who are planning to buy their first homes. Last week, UK Chancellor of Exchequer George Osborne announced that the government will contribute 25% to deposits that should make a first payment for a new home purchase.
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 Retail Sales and US Unemployment Claims
The most important data releases for Thursday are the UK Retail Sales and the US Unemployment Claims. The Retail Sales change is expected to increase to turn positive, while the Unemployment Claims are forecast to remain at the same level. However, deterioration in the Jobless Claims is still likely, and all factors point at bullishness of the Pound.
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 noted 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 such, the overall result was Dollar-negative," he explained.
GBP/USD aiming for the Jan low
On Wednesday, the British Pound advanced, but not as far as expected. The pair tested the January low; however, it lacked strength to reach resistance at 1.4918 and stopped at 1.4881. The current context of the market suggests a further rally of the Pound, despite the bearish technical indicators. The fundamental factors are presently in play, and they are likely to aid the British currency in getting back up to the January low.
Daily chart
GBP/USD is still traded in the tight range between the January low and 200-hour SMA. However, since Wednesday the pair has been slowly but steadily gaining ground. If the Retail Sales do not disappoint, we might see the Sterling well above the January low and, perhaps, even close to 1.50.
Hourly chart
Still more bears than bulls among traders
The gap between the long and short positions widened, as 46% of traders now have a positive outlook towards the Sterling. The number of buy orders also declined, from 49% to 40%.
SAXO Group's traders have an even more bearish outlook towards the Pound, as 54% of participants short the Sterling. OANDA's traders, on the other hand, are mostly bulls, as 55% of all positions are now long.
Spreads (avg, pip) / Trading volume / Volatility
16% of traders see GBP/USD at 1.54/1.56 in three months
Concerning the outcome of this week, the votes of Dukascopy Community members are divided nearly equally. Almost 50% of all predictions stay bearish and another 50% remain bullish. Meanwhile, the traders expect the Cable to close around the 1.4879 level this Friday.
One of the community participants, rokasltu, expects the GBP/USD to be at least over the 1.50 level. He bolstered his outlook by saying that "the pair managed to recover a substantial fall." Daytrader21, on the other hand, has a bearish perspective on the Pound. He thinks that "the broad based Dollar strength is still fully in motion." Although in the shorter term "the market seems more prone to consolidation before resuming the bearish trend," he added.