- The number of orders to acquire the Sterling increased from 52 to 56%
- 58% of all open positions are long
- The main short-term resistance lies around 1.4385
- Support is at 1.4255, namely the weekly S1
- 54% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: Philadelphia Fed Manufacturing Index, US Jobless Claims, US CB Leading Index, US Natural Gas Storage, US Crude Oil Inventories
The Sterling struggled to outperform other major currencies, as it mainly succeeded only against the Swiss Franc. The GBP/CHF edged 0.30% higher on Wednesday, while the Pound remained relatively unchanged against the Euro, adding 0.07%. At the same time, due to rather mixed UK fundamentals, the Sterling weakened 0.06% against the Yen and 0.08% versus the US Dollar. However, the British currency sustained heavy losses against commodity-based currencies. On an increase in oil prices, the Pound lost 1.47%, 1.10% and 0.89% against the Loonie, the Aussie and the Kiwi, respectively.
The UK unemployment rate failed to decline as economists had expected and remained unchanged at a decade low in the final quarter of 2015, despite the number of people applying for unemployment benefits plunged to the lowest level in 40 years. The jobless rate remained at 5.1% between October and December, with unemployment falling by 60,000 to 1.69 million people in the reported month. More than 31.4 million people are in work, the highest figure since records began in 1971. Wages excluding bonuses increased above predictions and hit 2%, while pay excluding bonuses failed to climb as high as expected, only reaching 1.9%, the lowest level since February last year..
Meanwhile, Britain's inflation climbed to the highest level in a year in January as an increase in alcohol and clothing prices pushed up the cost of living. The annual consumer price index rose to 0.3% in January, up from 0.2% in the prior month, according to the Office for National Statistics. Alcohol and tobacco were the main contributors to the increase as they jumped 1.3% compared with January 2015. The ONS reported that inflation also rose as fuel and food prices declined less than they did a year ago. Core inflation, which strips out volatile components such as energy and food, slowed to 1.2%. Inflation is predicted to edge up slowly this year, as the impact of global oil plunge drops out of the headline rate.
Philadelphia Fed Manufacturing index is the main USD driver today
There are no significant economic data releases concerning the UK economy today, therefore, attention should be focused on the upcoming US data, such as the Philadelphia Fed Manufacturing Index and the US Jobless Claims. The Philly Fed Manufacturing Index is a spread index of manufacturing conditions (movements of manufacturing) within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM manufacturing Index (Institute for Supply Management) and the index of industrial production. It is also used as a forecast of The ISM Index. Secondly, the Initial Jobless Claims, which are released by the US Department of Labor, measure the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. According to the forecasts, the Fed Manufacturing Index is expected to improve, while the Jobless Claims to increase, thus, to worsen.
GBP/USD takes another shot at edging above 1.43
The Cable was able to almost completely recover from its intraday loss, as the FOMC minutes were interpreted as dovish. The weekly S2 at 1.4255 keeps providing immediate resistance and is likely to prevent the GBP/USD from edging lower. However, technical studies remain in favour of the bullish scenario, implying the Sterling could remain above the 1.43 major level. Meanwhile, the closest area to limit the gains is located just under the 1.44 mark, but is unlikely to be reached today.
Daily chart
Since breaching the support line on Tuesday, the GBP/USD currency pair appears to have entered a period of consolidation, ranging from 1.4240 to 1.4340. With no market movers expected to have a serious impact on the Cable's exchange rate, the current trading range is likely to remain unchanged, with the pair circling around the 1.43 level.
Hourly chart
Three brokers - three sentiments
Today 58% of all open positions are long, compared to 63% on Wednesday. At the same time, the number of orders to acquire the Sterling increased from 52 to 56%.
The clients of the other two brokers seem to have different opinions on GBP/USD. OANDA traders are bullish on the UK currency. Right now, 60% of them are long, compared to 59% yesterday. At the same time, Saxo Bank traders are net short the currency pair: 54% of open positions are short and 46% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (54%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by 15% of the voters, namely the 1.46-1.48 one, while the second most popular choice implies the Pound is to cost either between 1.42 and 1.44 dollars or even less than 1.38 dollars in three months, both chosen by 13% of the surveyed. At the same time, the mean forecast for May 18 is 1.4465.
This week the pair's sentiment strengthened, as now 78% of all votes are bullish on the cross, compared to the previous 66.7%. The average expectation for February 19 stays around the 1.461 level.
A trader with a positive outlook towards the GBP/USD, namely babanu, suggests that "for the British Pound things might develop slightly different than the Euro". He believes that if the weekly pivot will hold, then we might see the previous highs of 1.4650 level reached.
Among the minority of traders, that hold short positions, locked said that he expects the Sterling to continue its bearish trend and end the week lower.