- 54% of commands placed 100 pips from the spot are to sell the UK currency
- 42% of the traders retain a positive outlook
- 17% of traders see the British currency at 1.44-1.46 in three months
- Nearest resistance lies at 1.4810, represented by the 20-day SMA, while closest support rests at 1.4734, namely the weekly PP
- Upcoming events: US Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, US NAHB Housing Market Index, US Crude Oil Inventories
The British Pound experienced mixed performance over the day, as it appreciated against some major peers and also declined against the others. The Sterling added the most versus the Greenback, 0.72%, following with a 0.24% gain versus the Aussie. At the same time, 0.18% and 0.17% losses were registered against the Kiwi and the Loonie, respectively.
British inflation remained at its all-time low in March, as gas prices continued to weigh on cost of living in the UK, while prices for clothes and shoes broke with the usual pattern. According to the Office for National Statistics, the UK's inflation stayed at 0% for the second consecutive month in March, marking the lowest level since records began in late 1980s. Clothing prices fell 0.1% between February and March, the first time in the history of the consumer price index that clothing has declined during this period. The sharp fall in inflation has been caused by the precipitous decline in oil prices, as well as drops in food prices. However, core measure of inflation, which strips out volatile energy, food, alcohol and tobacco, slid to the lowest level in nearly nine years at 1.0% in March compared with 1.2% in February.
A separate report showed input prices rose between February and March, beating expectations for a fall into deflation. UK input price index increased 0.3%, up from the 0.1% rise a month earlier, and considerably above the median estimate of a 0.4% monthly drop, the Office for National Statistics reported. The index was driven up by a 4.3% rebound in crude oil prices between February and March. Meanwhile, the UK house price inflation cooled in February to 7.2%, compared with the 8.4% reading in January.
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.
Several US economic figures expected to worsen
There will be no significant reports on the UK economy today, while there is a number of the US releases. All the events should have a medium impact, and the data expectations are quite mixed, but mostly negative. As a result, the Greenback might experience some selling pressure and give room for other currencies, in this case the UK Pound, to rise.
David Starkey, market analyst from Cambridge Mercentile, said that the BoE is most likely going to leave the rates unchanged. However, he also mentioned that "there is certainly a bit of dissent amongst the BoE, their chief economist suggested that there could be room for a cut if inflation continues to track negative, while Carney has openly and publicly suggested that the next move is going to be a hike." The analyst also gives his prospects for the near future, saying that "dissent is probably good, the BoE is going to be analysing the situation closely, the majority of the members still lean towards a hike, one descending voice does not suggest that it is going to be a cut in the near term."
GBP/USD to step back
The Sterling surprised with its performance against the US Dollar, as the price surged more than 100 pips. The Cable dropped below 1.46 first, but did not stay beneath the round level for long. Ultimately, GBP/USD breached the barrier at 1.47, as the weekly PP was unable to stop Pound's appreciation. Today, as suggested by the technical studies, we expect a bearish correction, and there is a high chance of a sell-off back to 1.47. Additional support is represented by the Bollinger band at 1.4640.
Daily chart
After breaking out of the down-trend, the Sterling has been steadily appreciating against the US Dollar. A substantial rally took place yesterday, but was stopped by the 200-hour SMA around 1.48. Right now the GBP/USD pair is consolidating, but a bearish correction is expected to take place by the end of the day.
Hourly chart
Market sentiment unchanged
Both net positions and net orders remain unchanged. Right now 42% of the traders retain a positive outlook towards the Sterling, while 54% of commands placed 100 pips from the spot are to sell the UK currency.
Market sentiment of SAXO Group traders turned even more negative, as today 58% of all positions are short (previously 52%). Meanwhile, OANDA traders' sentiment has reached a perfect equilibrium.
Spreads (avg, pip) / Trading volume / Volatility
17% of traders see the British currency at 1.44-1.46 in three months
The mean forecast for July 15 suggests the Sterling will cost 1.4885 dollars. However, only 40% expect the Pound to exceed the 1.50 price level. The most popular price interval is 1.44-1.46, selected by 17% of survey participants, while the second place is divided between 1.48-1.50 and 1.54-1.56, both chosen by 11% of traders.
This week Dukascopy traders are more bearish with respect to the British currency's perspectives than before: only 46.2% of all participants expect appreciation of the Sterling.
A trader with a bullish perspective towards the Cable, Likerty, mentioned that the Pound tested a very powerful support at 1.4590 and "as long as it sits above – perspective for notable bullish correction is possible. However, geula4X, another community participant, is short the Sterling. He argues that "GBP/USD seems quite bearish on the daily chart," as "the the price has broken down below the 1.4700 key support." Furthermore, geula4X adds that "March 13 support is now ready to act as resistance on any bounce higher," while "new support lies around 1.4545, the closing price of weekly candle of June 7, 2010."