- The share of orders to acquire the British currency increased from 41 to 55%
- 51% of traders are still bullish towards the Cable
- 21% of the poll participants expect the British Pound to cost between 1.60 and 1.62 dollars after a three-month period
- Immediate resistance lies in face of the weekly PP at 1.5594
- The nearest support rests around 1.5545, represented by the weekly pp, 20 and 55-day SMAs
- Upcoming events today: UK Preliminary GDP, US Markit Services PMI, US CB Consumer Confidence
The Sterling experienced mixed performance over the day, as it appreciated against some major peers and declined against the others. Gains were detected against the US Dollar, the Aussie, the Loonie and the Swissie, adding 0.26%, 0.24%, 0.23% and 0.22%, respectively. The Pound suffered a rather big loss against the Euro (0.79%), following with lesser ones of 0.47% and 0.14% versus the Kiwi and the Yen, respectively.
The UK factory orders rose at the weakest pace in two years in July as a strong Pound has further dimmed the outlook for manufacturing exports.The Confederation of British Industry's industrial order book balance declined to –10 this month, hitting the lowest level since July 2013 and compared with –7 in the prior month. Economists, in contrasts, had expected the reading to improve slightly to –5. Nevertheless, the gauge remained above its long-term average of –15. The CBI's quarterly industrial trends survey suggested a clouded outlook for manufacturers. Expectations for export orders in the next three months plunged to their lowest level since October 2011, as manufacturers are continuing to feel pressure from a strong Pound. Earlier this month, the Sterling reached the highest level in more than seven years on a trade-weighted basis. The British economy remains heavily reliant on consumer spending, the recent reports showed.
Data due later today is expected to show the UK economy rebounded from a surprise slowdown in early 2015 and expanded by a quarterly 0.7% in the April-June period, returning back to the growth rate seen at the end of last year.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
UK GDP, US CB Consumer Confidence
The first even today is the UK Preliminary GDP, which is the broadest measure of economic activity in the country. The Preliminary GDP tends to have the most impact on the market, since it is the first out of three GDP releases during the quarter. Although historical data shows mostly worse-than-expected figures, GDP is forecasted to grow at a higher pace, compared to its previous indication. Furthermore, later today the US CB Consumer Confidence is to be released. It shows the consumer spending activity, which in turn accounts for the majority of all economic activity. Even though the figures are expected to worsen, the Consumer Confidence data tends to behave differently and ignore the forecast. Therefore, we might see improvements in today's report, instead of the expected deterioration. However, the UK Preliminary GDP should have a higher impact on the Cable than the Consumer Confidence. As a result, the GBP/USD currency pair is likely to rise today.Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD on the path of negating last week's losses
Surprisingly, the Cable appreciated on Monday, even despite better-than-expected US fundamental data. The Sterling even attempted to reach the 1.56 major level, but stabilised at 1.5562, as it was pushed back by the monthly PP. Today the pair opened above a strong support cluster, represented by the 20 and 55-day SMAs and the weekly PP, which altogether should cause the British Pound to rally again. As a result, the 1.56 is likely to be reconquered, but with the weekly R1 limiting any further growth.
Daily chart
The Sterling did pierce the 1.55 major level to the downside yesterday, but refused to stay in that area for long. A rather substantial rally occurred in the second half of the day, which contributed to the Cable reaching the 200-hour SMA. Although the SMA is providing resistance at the moment, it is expected to give in after the Cable receives a boost from the fundamental data releases.
Hourly chart
Bulls barely prevailing over bears
The portion of people with the positive outlook towards the Sterling remains unchanged at 51%. Meanwhile, the share of orders to acquire the British currency increased from 41 to 55%.
Other market participants now have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment shifted back to the bearish side, with 54% of all their positions now short. At the same time, OANDA's market sentiment slightly improved, as 52% of their traders are long the Pound.
Spreads (avg, pip) / Trading volume / Volatility
21% of the poll participants expect the British Pound to cost between 1.60 and 1.62 dollars after a three-month period
According to the survey conducted between June 28 and July 28, 21% of traders assume the GBP/USD currency pair will cost between 1.60 and 1.62 dollars within three months. However, the second place is divided between two price intervals, 1.52-1.54 and 1.58-1.60, both selected by 13% of the surveyed. The mean forecast for October 28, on the other hand, is 1.5683.