- The buy orders are now in the minority, taking up 47% of the market, compared to 63% yesterday
- Trader's outlook towards the Sterling slightly improved, as 43% of all positions are now long (previously 41%)
- 13% of traders see the British currency either at 1.42-1.44 or 1.44-1.46 in three months
- Nearest support lies at 1.4882, represented by the weekly R1, while closest resistance rests at 1.4964, namely the monthly PP
- Upcoming events: UK Average Earnings Index, UK Claimant Count Change, UK Unemployment Rate, US CPI and Core CPI, US Preliminary UoM Consumer Sentiment
The Sterling experienced mixed performance over the day, as it not only strengthened against some major currencies, but also weakened against the others. The Pound gained 0.62% and 0.52% versus the Greenback and the Yen, respectively. At the same time, there were registered losses against the Aussie (0.96%) and the Kiwi (0.38%).
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.
UK Jobless Claims and Unemployment Rate
The nearest upcoming events are the UK Claimant Count Change and Unemployment Rate. The Unemployment Rate is expected to improve, while the Jobless Claims figure is expected to worsen, thus the impact on the Sterling is uncertain. The Consumer Sentiment in the US is also likely to improve, so technically more facts indicate pressure for the British currency. However, the US figures have surprised to the downside lately, and today might not be an exception.
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 rises on weak Dollar
Yet again the US fundamentals weighed on the Greenback. As a result, the British Pound climbed up for the fourth day in a row, completely negating last week's losses. Moreover, the 1.49 barrier was crossed, and the GBP/USD pair closed at 1.4924. On Friday, a smaller rally is expected, although a possibility of a decline exists. The gains should be limited by strong resistance at 1.50, while a fall back towards 1.48 is the likely outcome if data releases disappoint.
Daily chart
On the hourly chart the Cable is seen appreciating for the past four days. The GBP/USD pair is approaching the support trend-line now, where it should find support and extend the rise. However, the trend-line might be pierced to the downside, as the Sterling is also getting closer to the April high at 1.4978, which can provide strong resistance.
Hourly chart
Bears remain dominant
Trader's outlook towards the Sterling slightly improved, as 43% of all positions are now long (previously 41%). The buy orders are now in the minority, taking up 47% of the market, compared to 63% yesterday.
SAXO Group's trader sentiment worsened today, 61% of all positions are short (previously 59%). Meanwhile, OANDA's traders grew more confident in the Sterling, with 53% of positions being long, compared to 51% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
13% of traders see the British currency either at 1.42-1.44 or 1.44-1.46 in three months
The mean forecast for July 17 suggests the Sterling will cost 1.4858 dollars. However, only 39% expect the Pound to exceed the 1.50 price level. The most popular price intervals are 1.42-1.44 and 1.44-1.46, selected by 13% of survey participants each, while the second place is divided between 1.48-1.50 and 1.54-1.56, both chosen by 12% 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."