- The number of pending orders to acquire the Sterling edged further up to 61% (previously 56%)
- The shares of long and short positions have reached a perfect equilibrium
- 16% of voters see the Pound between 1.48 and 1.50
- Resistance lies at 1.4964, represented by the monthly PP, while the weekly PP (along with the 20-day SMA) act as a support around 1.4865
- Upcoming events: US FOMC Member Dudley Speech, US ISM Non-Manufacturing PMI, UK Halifax HPI, UK Services PMI, US JOLTS Job Openings
The British Pound experienced mixed performance through Friday, significantly appreciating only against the US Dollar (0.61%), but plunging versus other major peers. A 0.74% loss was detected against the Kiwi and a 0.46% decline versus the Swissie, while the Sterling remained relatively unchanged against the Yen (-0.02%), the Loonie (0.04%), and the Aussie (0.11%).
Activity in the British construction sector, which accounts for some 6.3% of the country's total GDP, cooled more than expected in March, undermined by concerns over May's general election. The monthly Markit/CIPS UK construction PMI dropped to 57.8 last month following a rise to 60.1, the highest level in four month in February. Expectations were for the index to ease to 59.5 in the reported month. Yet, the gauge remained confidently above the contraction line for the 23rd straight month. Growth weakened across the industry, while the slowdown was most marked in the civil engineering sector. The cooler pace of construction growth is due to some businesses delaying spending ahead of the national election on May 7, Markit reported. Nevertheless, construction firms appeared to be highly optimistic about their prospects over the course of next 12 months, with confidence reaching the highest level in nine years.
The data adds to mixed bag of news earlier this week, after the Office for National Statistics said the British economy grew stronger than previously estimated in the fourth quarter, while services sector contracted in January. Markit also reported activity in the UK manufacturing sector rose to the highest in eight months at the end of the first quarter, indicating the nation's economy has been keeping momentum.
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."
In light of the recent data, Ian Stewart, chief economist at Deloitte, reckons "the UK has quite good momentum," which largely stems from the exports and the consumer. He also sees "decent recovery" in the investment, and this is likely to result in the UK being "one of the fastest growing economies in Europe." At the same time, Steward does not consider the elections to be a major risk factor for this recovery, though he does acknowledge a likelihood of greater volatility in financial markets in the run-up to the general election.
According to the economist, the general effect of strong economic data out of the UK should be supportive of the Sterling, particularly against the Euro, while concerning the speculations on the UK leaving the European Union, Stewart thinks this is a low-probability event, with the chances that are "well below 50%," since most political parties and a large portion of business and media would likely campaign in favour of continued membership.
Bank holiday in the UK; tunnel vision on ISM Non-Manufacturing PMI
Due to holidays in the UK, no data releases concerning the country are expected. Nevertheless, despite other US events, the ISM Non-Manufacturing PMI remains the main one and is to have the most impact on the currency pair. Figures are anticipated to worsen, thus pressuring the Greenback against the Sterling.
GBP/USD breaks out
Last Friday, the British Pound finally managed to break out of its chains, which were holding the currency between the weekly S1 and 20-day SMA. The Sterling appreciated versus the US Dollar and not only pierced the 20-day SMA, but also the weekly PP. The trading session ended with the Pound at 1.4863, and the rally extension is expected, despite the mixed technical studies. However, the climb is likely to be insignificant, and the GBP/USD pair will resume trade between the weekly and monthly pivot points.
Daily chart
The GBP/USD pair managed to exit the down-trend slide, which lasted for a week. The resistance trend-line was breached, but a new significant level was encountered at 1.4929, which stopped the currency pair from advancing further. New resistance is also a down-trend; hence, pressure on the Sterling is expected to persist during the week.
Hourly chart
SWFX traders equally divided between bulls and bears
The shares of long and short positions have reached a perfect equilibrium. Meanwhile, the number of pending orders to acquire the Sterling edged further up to 61% (previously 56%).
There are less bulls among the SAXO Group traders, as 53% of all positions are currently short, whereas the attitude of OANDA clients' improved, with 55% of traders now being long the Sterling.
Spreads (avg, pip) / Trading volume / Volatility
Most forecasts are between 1.48 and 1.50
The mean forecast for July 06 is 1.4931; however, only 43% of voters expect the Sterling to cost more than 1.52 US dollars in three months. The most popular price interval is 1.48-1.50, chosen by 16% of the survey participants, while the second place was divided between 1.44-1.46 and 1.54-1.56, both selected by 13% of traders.