- The portion of orders to acquire the Sterling dropped to 40%
- 53% of all positions are now long
- 16% 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 and monthly PPs around 1.5515
- The nearest support rests around 1.5330, represented by the Bollinger band, July low and 200-day SMA
- Upcoming events today: UK Manufacturing PMI, UK Net Lending to Individuals, UK Mortgage Approvals, US ISM Manufacturing PMI, US Construction Spending
The Sterling declined against most major peers amid concerns that the BoE is not going to raise rates before the New Year. The Pound lost 1.08% against the Loonie, following with rather moderate losses against the Yen (0.50%), the Euro (0.47%) and the Buck (0.34%). The GBP/NZD edged 1.36% higher, as the New Zealand's business confidence dropped to a six-year low. The Pound also remained relatively unchanged against the Swissie and the Aussie, adding 0.07% and 0.06%, respectively.
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.
UK and US Manufacturing PMIs
The most important even from the UK side today is the Markit Manufacturing PMI. The given data release is significant, due to the manufacturing sector taking up a large portion of the GDP, thus, providing insight on overall economic conditions in the UK. The forecast stands at 52, up from 51.9, showing signs of improvements; however, such a minor change might have little effect on the Sterling's market price. As a result, secondary data from the UK are likely to help influence the Pound's price as well. From the US side the same data release is due at 14:00 PM GMT, but with an anticipated deterioration. The US Construction Spending, released by the Census Bureau, is an indicator that measures the total amount of spending in the US on all types of construction and is expected to decrease as well, putting more pressure on the US currency.
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 attempts to reclaim 1.54
The Cable failed to remain above the 1.54 major level, as the monthly S1 was unable to hold the losses. However, the Bollinger band provided sufficient support, causing the GBP/USD to stabilise at 1.5362. The Sterling is expected to rebound, as the immediate support cluster today is even stronger, represented by the Bollinger band, July low and 200-day SMA. Meanwhile, the nearest support lies out of reach, while gains should be limited by 1.5440, as this area prevented the Pound from edging higher on several occasions.
Daily chart
The Cable was unable to climb above 1.5440, repeating last Friday's scenario. Another move towards the July low caused the GBP/USD to rebound, regaining its bullish momentum for the time being. However, the Sterling risks to bounce back again, now from the 1.54 major level, where it coincides with the newly-forming resistance trend-line.
Hourly chart
Bulls barely outnumbering the bears
Bulls gained some numbers, as 53% of all positions are now long (previously 51%). At the same time, the portion of orders to acquire the Sterling lost 12 percentage points, down to 40%.
Other market participants have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment remains unchanged, as 54% their positions are long. At the same time, among OANDA traders, the number of bulls increased by three percentage points up to 59%.
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 August 1 and September 1, 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 1.5748.