- The share of sell orders is presently in the majority with 53%
- Right now 42% of traders have a positive outlook towards the Pound, and the remaining 58% are short the Sterling
- Mean forecast for July 8 is 1.4932
- Resistance lies at 1.4867, represented by the weekly PP, along with the 20-day SMA, while the weekly S1 acts as support at 1.4791
- Upcoming events: BoE Credit Conditions Survey, US FOMC Member Dudley Speech, US Crude Oil Inventories, US FOMC Meeting Minutes
Sterling's performance over the day was quite mixed, as gains, as well as losses, were seen. The Pound added 0.50% against the Euro, following with minor gains against the Swissie, Kiwi, and the Yen. At the same time, 1.02 and 0.48% declines were registered versus the Aussie and the Greenback, respectively.
Business activity growth in the UK services sector, which accounts for some 78% of the nation's economy, accelerated to the highest level in seven month in March as the whole economy picked up steam in the beginning of 2015. According to Markit, services PMI rose to 58.9 from 56.7 in February, whereas economists had predicted the reading to climb to 57.0. Markit's services survey showed employment growth remaining close to a record high in March and signs of inflation climbing. Taking into account the previous week's data on manufacturing and construction, the economy is expected to grow 0.7% in the three months through March following the 0.6% rise at the end of 2014. Despite the economy already reaching pre-crisis levels last year and keeping momentum further into the medium term, economists expect the Bank of England to stay in its comfort zone in April and most probably for the major remainder of the year. BoE policy makers gather on Thursday and are seen to keep the base rate unchanged at the record low of 0.5%, marking the seventh year of ultra accommodative policy.
According to the latest growth survey of the Confederation of British Industries, the UK economy managed to keep up pace in the first quarter and is expected to grow stronger moving further into the year.
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.
UK BoE Credit Conditions Survey and US FOMC Meeting Minutes
The main event is still the FOMC Meeting Minutes, despite the BoE's Credit Conditions Survey today. On the meeting later today, the picture will become clearer on what the members have in mind. Dovish minutes will enhance the effect of the latest NFP report.
GBP/USD closes in on 1.47
The support cluster around 1.4866 failed to stop GBP/USD from declining on Tuesday. As a result, the Sterling tested the 1.48 level, which, along with the weekly S1, prevented a harder fall. Today the barrier might be breached, although a slump further than 1.4750 is unlikely. This important level has stopped the Sterling from retreating in the past three weeks, and it is also backed up by the Bollinger band. Moreover, the technical studies are bolstering the bearish bias for the current pair.
Daily chart
The channel pattern was not confirmed, as the Pound declined too much yesterday. However, the Sterling is attempting to negate Tuesday's losses right now, although the efforts are likely to be in vain, as the daily bias remains bearish.
Hourly chart
More bearish than bullish traders
The gap between the long and short positions widened. Right now 42% of traders have a positive outlook towards the Pound, and the remaining 58% are short the Sterling. Meanwhile, the share of sell orders is presently in the majority with 53%.
SAXO Group traders' sentiment remains unchanged, 52% of the clients are bulls, while OANDA market participants' bullish outlook towards the Sterling slightly worsened, from 58 to 57%.
Spreads (avg, pip) / Trading volume / Volatility
Mean forecast for July 8 is 1.4932
According to the survey, taken between March 8 and April 8, the Sterling is expected to cost 1.4932 dollars in three months. The most popular price intervals were 1.44-1.46 and 1.48-1.50, both chosen by 15% of the traders. The second most popular price range (14% of participants) was 1.54-1.56, although only 42% of the surveyed expect the Pound to cost more than 1.50 dollars.
The forecasts of the Dukascopy Community members are considerably more bullish than before, as almost 80% predict the GBP/USD pair to rise.
Likerty, one of the Sterling-bulls, expects the Pound to appreciate, as he sees the same pattern as with other majors – bullish trend on the US Dollar correction. Likerty also mentioned that "the Sterling indicated 1.5230's as its next big bull target, but could go even higher." This week Likerty sees the target at 1.4980. Kraismik, on the other hand, has a bearish outlook towards the British currency. He expects the pair to establish a range between 1.4730 and 1.5000.