- The portion of commands to acquire the Sterling increased from 51 to 58%
- There are now 63% of traders holding long positions
- Average three-month forecast is 1.5399
- Immediate resistance is around 1.5180 (monthly S1; 23.60% Fibo)
- Dips to be limited by 1.5161
- Upcoming events today: UK Current Account, UK Final GDP, US ADP Non-Farm Employment Change, US Crude Oil Inventories, Fed Chair Yellen Speech
The British Pound suffered losses against most major peers, with exception against the Loonie. The Sterling declined the most versus the Kiwi (0.43%), the Swiss Franc (0.36%) and the Yen (0.31%). The Pound remained relatively unchanged versus the Aussie, losing only 0.09%, while also adding 0.04% against the Canadian Dollar.
Lending to British households rose in August to its highest monthly total in more than seven years, as an improving economy and low interest rates fuelled demand. According to the BoE's report, lending to consumers was 4.3 billion pounds in August, up from 4 billion pounds a month earlier, while markets anticipated the reading of 4.1 billion pounds in total. The increase was mainly boosted by home loans, as the net loans on property jumped to 3.4 billion pounds in August, showing the biggest climb since May 2008. Mortgage approvals increased to 71,030 in the reported month, compared with 69,000 in the preceding period, while economists forecasted a gain to 69,800. Recent figures added to evidence that the housing market is strengthening, with asking prices for the UK homes reaching record levels in September. The BOE report also showed that lending to businesses rose by two billion pounds in August, while loans to small and medium-sized companies increased by 284 million pounds.
Meanwhile, even though Britain's economic upturn is still heavily reliant on spending by households, the BoE claims that investment is playing an increasing role and that it is wrong to characterise Britain's recovery as being fuelled only by debt.
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 Current account, Final GDP and US ADP Non-Farm Employment Change
The UK's Final GDP figures are due today at 8:30 AM GMT, but with this being the last GDP release for the past quarter, the impact is likely to be not as significant. Therefore, the UK Current Account, which is released at the same time as the GDP, is to drive the exchange rate accordingly. Although improvements are expected, according to historical data figures of the current data release tend to disappoint and might show weaker numbers again today. The last release to influence the Cable today is the US ADP Non-Farm Employment Change. This is the early look at the employment growth in the US, ahead of the Friday's release. The number of employed people in the previous month is expected to slightly rise and should be the concluding event to drive the exchange rate today among the data releases. Ultimately, the Fed's Chair is scheduled to speak at 19:00 PM GMT and provide more insight concerning the Fed's most likely upcoming interest rate hike.
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 break out of its bearish trend
The GBP/USD currency pair reached the lowest point since August, as it stabilised at 1.5148. There are no signs of a potential recovery yet, and the technical indicators are also giving bearish signs, suggesting the Cable is to extend its decline today as well. The monthly S1 and the 23.60% Fibo keep providing resistance, but with the August low broken, immediate support is now located at 1.5066 in face of the Bollinger band. However, a rally is still possible if the US fundamentals disappoint today.
Daily chart
On the hourly chart the Cable was seen hitting the trend-line and the 23.60% Fibo, which provided sufficient resistance in order to keep the pair from rising higher. The trend-line keeps preventing the GBP/USD from edging higher today as well, but risks of it being broken persist.
Hourly chart
Bulls prevailing over bears
Both net positions and net orders improved. There are now 63% of traders holding long positions (previously 62%), whereas the portion of commands to acquire the Sterling increased from 51 to 58%.
The sentiment at SAXO Bank remains bullish, as 57% of their traders are long the Sterling. Bulls at OANDA also remain in the majority of the market, with 62% of their positions being long (previously 66%).
Spreads (avg, pip) / Trading volume / Volatility
Average three-month forecast is 1.5399
Judging by the results of the poll among Dukascopy website visitors, traders do not seem to expect a lot of change in the Sterling-Dollar exchange rate during the next three months. The average forecast for GBP/USD is to trade at 1.5399 on Dec 30, but this does not fully reflect the structure of the votes. The most frequently chosen price intervals are quite far from the mean value, that is the 1.48-1.50 and 1.60-1.62 intervals, selected by 16% of respondents each, followed in popularity by 1.46-1.48 (12% of respondents).
Following negative development of the pair during September 21-25 week, participants of our weekly Community Forecasts quiz decided to become much more bearish on the Cable, as currently only 45% of them support movement to the north in course of this week. The average prediction, in turn, is now located at 1.520 level.
On the bullish side, khalidamassi, one of the Dukascopy Community members, says that the Cable fell sharply last week to 1.51, before recovering to 1.52. He believes that it is a strong support, which is likely to hold this week. However, he warns that "the bullish scenario may be threatened by good US NFP numbers." On the bearish side, however, TRENDMASTER suggests that the "Cable remained in bearish market and at risk of further depreciation with strong downtrend formation on monthly/daily and 4-hourly time frame." Consequently, he believes that this week the currency pair will extend its downtrend.