- The share of sell orders increased from 53 to 68%
- 52% of all positions are now long
- 16% 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 at 1.5504
- The nearest support rests at 1.5434, represented by the 20-day SMA
- Upcoming events today: UK Consumer Inflation Expectations, MPC Member Forbes Speech, US PPI and Cori PPI, US Preliminary UoM Consumer Sentiment, US Monthly Budged Statement
The Sterling appreciated against some major peers, amid the BoE's monetary policy remaining unchanged. The Pound added 0.89% versus the Yen, 0.55% versus the Greenback, 0.33% against the Swissie and 0.17% against the Loonie. However, the British currency also declined against some currencies, such as the Kiwi, losing 0.23%. At the same time, the GBP/AUD dropped down 1.07%, as a lot better-than-expected Australian Employment Change boosted its currency. Furthermore, the Pound remained relatively unchanged against the Euro, losing only 0.03%.
The nine-member Monetary Policy Committee of the BoE voted 1-0-8 to keep its benchmark interest rate at a record-low 0.5%. The only member who voted for an immediate increase by 25 basis points was Ian McCafferty. September's MPC minutes continued to sound more dovish as downside risks to global economic activity and the inflation outlook have increased since the August Inflation Report. The BoE also stuck to its view that consumer prices will start to pick up around the turn of the year, though it noted that a drop in oil prices had increased uncertainty about the near-term outlook. Minutes also showed that there was considerable scepticism about how the strength of the Sterling would feed through to the UK inflation. However, the central bank retained its positive outlook on the UK economy's prospects, despite the concerns over China and the global economic growth.
Even though the BoE lowered its estimate for the third-quarter growth to 0.6%, down from expected 0.7%, the minutes also said that the forward looking indicators had continued to point to steady near-term growth in aggregate demand. At the meeting, the MPC also voted unanimously to keep the asset-purchase facility at 375 billion pounds.
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 PPI, Preliminary UoM Consumer Sentiment and Budget Balance
Today's focus turns to the US fundamentals, with the first even at 12:30 PM GMT being the PPI. The PPI is released by the Bureau of Labor Statistics. It measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. The yearly PPI is expected to worsen, as the forecast stands at -0.90%, down from -0.80%. Another significant even to consider is the US Preliminary UoM Consumer Sentiment, which is a leading indicator of consumer spending, which, in turn, accounts for the majority of all economic activity. The Sentiment Index is also expected to deteriorate, namely from 91.9 to 91.2, leaving us with the final Friday's data release – the Budget Balance. Improvements in the Balance could turn the tide for the US currency and provide a sufficient boost to outperform other major peers.
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 keeps climbing slowly
As anticipated, the Cable appreciated on Thursday, in spite of the BoE's policy remaining unchanged. The GBP/USD crossed the expected 1.54 threshold and eventually settled in front of the 20-day SMA. The given SMA is now providing support, while the BoE's aftereffect is likely to influence the Pound today and prevent it from edging lower. However, a tough resistance cluster rests just over the 1.55 mark, limiting any ultimate volatility to the upside today. Meanwhile, technical studies are showing bearish signs, suggesting the Buck might retreat to the weekly R1 at 1.5366.
Daily chart
The Cable successfully reached its target, namely the last week's high of 1.5437. Even though the GBP/USD is consolidating at the momentum, the bullish momentum is likely to be regained by day's end, where the last week's high coincides with a possible new trend-line.
Hourly chart
Bulls and bears keep pushing to the equilibrium
Bulls and bears edged closer to equilibrium, with 52% of all positions now being long. The share of sell orders increased from 53 to 68%.
Other market participants also have a positive outlook towards the Sterling. For instance, 55% of OANDA's traders hold long positions (previously 51%), whereas among SAXO Group traders, sentiment remains bearish, with 57% of all positions being short.
Spreads (avg, pip) / Trading volume / Volatility
15% 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 11 and September 11. The given interval was chosen by 16% of the poll participants each, whereas the second price ranges, all five selected by 10% of the voters, imply that the Sterling will cost either between 1.46 and 1.48 dollars or somewhere between 1.54 and 1.62 dollars in three months. However, the mean forecast for December 11 is 1.548.
Dukascopy traders, in turn, became more undecided on future perspectives of this pair's movement, as bullish and bearish votes are almost equally divided at the moment.
A trader with the bullish outlook towards the Sterling, WallStreet6, assumes that "after nine days of depreciation we can expect a retracement and we can move back above 1.54." WallStreet6 also believes that interest rates will stay at the current level, but in his view it might still be supportive for the Cable. On the bearish side we have Khalidamassi, another member of the Dukascopy Community. He expects the Pound to fall by week's end, as the GBP/USD remains under pressure, last week it continued falling below 1.52 and now next critical point will be around 1.50. He believes there is no sign of recovery at this time.