- The number of commands to acquire the Sterling increased to 54%
- There are 58% of traders with a positive outlook towards the British Pound
- 14% of the poll participants expect the British Pound to cost between 1.48 and 1.50 dollars after a three-month period
- Immediate resistance lies in face of the weekly PP t 1.5265
- The nearest support rests around 1.5191, represented by the monthly S1
- Upcoming events today: UK BRC Retail Sales Monitor, UK Halifax HPI, US Labor Market Conditions Index, US Consumer Credit Change
The Sterling experienced mixed performance over Friday and the weekend, appreciating against some major peers and declining against the others. The Pound gained 1.21% versus the Kiwi, following with a 0.81% gain versus the Aussie and 0.24% versus the Loonie. Nevertheless, the largest loss of 1.22% was recorded versus the Yen, while the EUR/GBP edged down 0.68%, GBP/CHF declined 0.63% and the Cable was also down 0.41%.
Growth in the UK services sector, the key pillar of the British economy as it accounts for around 78% of the nation's economic output, unexpectedly slowed in August. Markit's services PMI declined to 55.6 down from 57.4 in July, hitting the lowest level in more than two years. The gauge of new business in the services industry plunged to 56.2 in August, the lowest since April 2013, from 58.6 in July. The data also revealed business expectations among service companies at the lowest since February, while input-price inflation slowed for a third straight month to the weakest since January.
The recent manufacturing and construction data suggest the pace of economic growth is set to slow to 0.5% this quarter, from 0.7% in the three months through June. However, the Bank of England predicts a growth rate of 0.7% in both the second and third quarters. Meanwhile, NIESR said in its latest outlook that it expected UK GDP to slow down in the third quarter, but growth would remain 2.5% this year. The CBI revised up its outlook for the British economy to an increase of 2.6% this year, before accelerating further to 2.8% in 2016, driven primarily by rising business investments and productivity, as well as strong domestic demand.
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 BRC Retail Sales Monitor
The beginning of the week is rather quiet in terms of fundamental data releases, with the only relevant even being the UK BRC Retail Sales Monitor. Although this is considered to be a low-priority data release, due to a Bank Holiday in the US, it is the only relevant fundamental event to influence the Cable today. Nonetheless, tomorrow attention should be paid to the US Labor Market Conditions Index, which indicates the labor market activity, however, it tends to have little impact on the exchange rate, as most of the indicators used in its calculations were already released previously. The second event is the US Consumer Credit Change – an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means.
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 takes another shot at rebounding
The Cable suffered more losses on Friday, not only piercing the weekly S1, but also the monthly one, only to find support at1.5164, namely the lower Bollinger band. Today trade opened just above the monthly S1, which is keeping the GBP/USD pair from falling deeper for now, as it is also bolstered by the major level of 1.52. Amid lack of fundamental data from the US, the Greenback is expected to weaken against most major peers, including the Sterling, and with the help of the mentioned support cluster to trigger a small surge.
Daily chart
The Cable keeps following the trend-line, with the lower boarder now in face of the June low at 1.5169. The given support was tested on Friday and is still being tested today. The June low might provide the GBP/USD with sufficient strength to regain its bullish momentum and pierce the resistance trend-line this as far as Wednesday, unless the Sterling sustains even heavier losses and slumps below the 1.5169 level.
Hourly chart
Bulls keep growing stronger
There are slightly less traders with a positive outlook towards the British Pound today, namely 58%. At the same time, the number of commands to acquire the Sterling increased to 54%.
Other market participants also have a positive outlook towards the Sterling. For instance, 58% of OANDA's traders hold long positions, whereas among SAXO Group traders, 56% of all positions remain long.
Spreads (avg, pip) / Trading volume / Volatility
14% of the poll participants expect the British Pound to cost between 1.48 and 1.50 dollars after a three-month period
The 1.48-1.50 price interval is now the most popular choice among all of the votes, collected between August 7 and September 7. The given interval was chosen by 14% of the poll participants each, whereas the second price ranges, both selected by 12% of the voters, imply that the Sterling will cost either between 1.50 and 1.52 dollars or between 1.58 and 1.60 dollars in three months. However, the mean forecast for December 7 is 1.5567.