- 52% of all orders are to buy the Sterling
- 51% of traders are long the Pound
- 18% 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 PP at 1.5522
- The nearest support rests around 1.5375, represented by the monthly S1 and Bollinger band
- Upcoming events today: US Chicago PMI, UK Manufacturing PMI, US ISM Manufacturing PMI
The British Pound appreciated against most major peers over Friday and the weekend, with exception against the Swiss Franc. The Sterling gained the most versus the Aussie, namely 0.54%, while the US Dollar proved to be the most difficult to outperform, as the Cable advanced only 0.03%. However, a 0.40% loss was detected against the Swissie, the only one among major currencies.
The second estimate of Britain's GDP showed no revisions to both quarterly and annual readings of economic growth. The UK economy was confirmed as one of the fastest growing western countries in the second quarter, as economic output expanded 0.7% between April and June, marking the tenth straight quarter of positive growth, according to the Office for National Statistics. Measured on an annual basis, the economy grew 2.6%. Growth in the June quarter was primarily supported by a strong services sector, climbing 0.7% and contributing to quarterly growth with 0.6 percentage points. Both the volume and value of business activity within UK services rose in the quarter to August, suggesting this sector, which accounts for as much as 78% of the total economic output, is set to continue supporting the overall economic performance in the third quarter, the Confederation of British Industries reported. Meanwhile, household consumption unexpectedly decelerated to a 0.7% growth during the second quarter, and business investment rose 2.9% in the second quarter compared with the previous three-month period.
Economists expect slower growth in China to affect western economies through weaker trade, even though Britain is unlikely to be hurt much, as trade with China accounted for around 4% of all British exports in the last year, official figures show.
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.
US Chicago PMI
In the UK there is a bank holiday today, meaning there are no economic data releases scheduled for Monday, which leaves us with the only relevant to the Cable event – the Chicago PMI. The given PMI is used to indicate the overall economic conditions in the US, as it is interrelated with the ISM Manufacturing Index. The forecast stands at 54.50, down from 54.70; although it is a decline, the number still remains above 50, thus, being relatively bullish to the US currency. Due to minor changes, the Cable might still trade flat today, while more influential events are to be expected tomorrow.
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 stays strong above 1.54
Although the Sterling declined against the US Dollar on Friday, the Cable quickly rebounded and stabilised above the 1.54 major level over the weekend. Due to the lack of market movers today, the GBP/USD currency pair is likely to retain its position above the psychological level and possibly to keep rebounding to 1.5470. From below the Pound remains supported by the monthly S1 and the Bollinger band, which should prevent any volatility in that direction. Meanwhile, technical studies keep giving mixed signals, suggesting the British currency is to trade flat over the day.
Daily chart
The Sterling edged closer to the July low on Friday, but managed to regain the bullish momentum by day's end. However, the 1.5440 mark appears to be providing some resistance, preventing the pair from advancing, as it did last Friday. A break of this area will most likely ensure the Cable's further rally.
Hourly chart
Bulls barely outnumbering the bears
Both net orders and net positions remain unchanged since Friday, with 51% of traders being long and 52% of orders to buy the Pound.
Other market participants have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment improved again today, as 54% their positions are now long (previously 52%). At the same time, among OANDA traders, the number of bulls increased by one percentage point up to 56%.
Spreads (avg, pip) / Trading volume / Volatility
18% 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 31 and August 31, 18% 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 1.48-1.50 price interval, selected by 11% of the voters. Meanwhile, the mean forecast for December 1 stands at 1.5771.