- Buy orders now account for only 52% of the market
- Bullish traders' sentiment remains unchanged at 51%
- 20% of the poll participants expect the British Pound to cost between 1.58 and 1.60 after a three-month period
- Immediate resistance lies in face of the weekly S3 at 1.5422
- The nearest support rests around 1.5390, represented by the Bollinger band and monthly S1
- Upcoming events today: UK Second Estimate GDP, UK Preliminary Business Investment, US Goods Trade Balance, US Core PCE Price Index, US Personal Spending and Income, US Revised UoM Consumer Sentiment
The Sterling experienced mixed performance on Thursday, appreciating against some major peers and declining against the others. The Pound gained 0.96% versus the Swissie, following with a 0.40% gain versus the Euro and 0.36% against the Yen. However, substantial losses of 1.27%, 1.21% and 0.98% were recorded against the Loonie, the Aussie and the Kiwi, respectively. Furthermore, the British currency also lost 0.45% against the US Dollar, amid strong US GDP data.
UK annual retail sales growth surprisingly increased this month, due to significantly low cost of living and rising real earnings. The Confederation of British Industry´s distributive trades total sales index surged to +24% in August following a print of +21% a month before, reflecting a pace of growth that was considerably above average for that time of year. The sales in August were supported by clothing and grocers' sales after two-month stagnation. The report also indicated that sales volumes are predicted to increase further in September. Companies increased their payrolls for the first time this year given expectations for a continued improvement in the business conditions over the coming quarter. Expectations for recruitment were at their best since May 2000.
According to the official data, declines in fuel sales as well as clothing and food translated into total retail sales volumes rise by just 0.1% in July. The latest report also confirmed total retail sales fell during the second quarter to 0.7% growth, compared with 0.8% in the first three through March. Despite slowing, quarterly growth should still have a positive contribution to the second-quarter economic output, by approximately 0.04%. Expectations for domestic spending in the UK have been mixed recently, with some analysts warning it could deteriorate even further once the BoE begins to hike its interest rate from the record low of 0.5%, given the burden of household debt and rising house prices.
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 Second Estimate GDP and US Goods Trade Balance
Today at 8:30 AM GMT the UK's Second Estimate GDP is due; however, according to the forecast it is likely to remain flat. A shift in either direction is likely to have the corresponding effect on the Sterling as well. At the same time, the Preliminary Business Investment data is to be released, which will determine the Cable's fate if the GDP meets expectations. From the US side, the most important event is the Goods Trade Balance at 12:30 PM GMT, together with the Personal Spending and Income figures. The Spending is expected to improve, while the Income to deteriorate, thus, shifting attention to the Goods Trade Balance. A positive number indicates that there were more exported than imported goods and, according to yesterday's strong US GDP figures, we should see improvements today as well. As a result, the Pound falls under the risk of declining against the US Dollar today, as a significant number of US fundamentals is forecasted to improve.
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 edge of reaching two-month low
The Cable dropped to the lowest in the last six weeks yesterday, with the immediate support cluster barely holding the losses. The Greenback weighed on the Sterling, amid much better-than-expected GDP data, with a similar situation due today. Strong UK GDP data is likely to boost the Pound and help it rebound, regaining some of the lost value over the past few days, with the weekly S2 limiting the gains. However, a poor reading can throw the GBP/USD deeper down towards the 200-day SMA around 1.5321.
Daily chart
The GBP/USD currency pair suffered more weakness on Thursday, falling even under the August low of 1.5424. However, the pair managed to rebound by day's end gravitated towards the August low again, now anchored around it. The UK GDP data is to determine whether the Cable is to keep recovering or fall back under 1.54.
Hourly chart
Bulls keep edging closer to equilibrium
Bullish traders' sentiment remains unchanged at 51%, whereas the number of purchase orders lost 12 percentage points. The commands now account for only 52% of the market.
Other market participants have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment improved again today, as 52% their positions are now long (previously 51%). At the same time, among OANDA traders, the number of bulls slightly declined to 55%, down from 58%.
Spreads (avg, pip) / Trading volume / Volatility
20% of the poll participants expect the British Pound to cost between 1.58 and 1.60 dollars after a three-month period
According to the survey conducted between July 28 and August 28, 20% of traders assume the GBP/USD currency pair will cost between 1.58 and 1.60 dollars within three months. However, the second place is now taken by the 1.50-1.52 price interval, selected by 11% of the voters. Meanwhile, the mean forecast for November 28 stands at 1.5716.
Nevertheless, the next trading week assumes the Sterling will rally further, as now almost 82% of Dukascopy Community members are strongly positive with respect to this currency. The mean estimate for Aug 28 is placed around 1.5750, or some 50 pips above the previous Friday's closing price.
Aslamhammad, a trader on the bullish side of the sentiment, assumes the Sterling to outperform the Buck, as the price has been ranging between 1.56 and 1.57 last week. He expects the GBP/USD to close higher this Friday, as the second quarter GDP data from UK was rather good, so it should boost the Sterling to the upside again. Nevertheless, on the lesser side of the traders, namely on the bearish one, megajorko said that "there was a very strong corrective move up to 1.57, which was opposite to EUR movement." He also mentioned that presently the EUR and GBP are in anti-correlation (EUR/GBP is going down), but the upcoming strong US events will push the Cable lower again.