The British currency weakened against almost every other major peer on Thursday, with the only exception being the New Zealand Dollar. The Pound lost the most against the Australian Dollar, as upbeat Australian employment data boosted its domestic currency yesterday, causing the GBP/AUD to slump 0.90%. At the same time, mild losses of 0.35%, 0.34%, 0.30% and 0.28% were registered against the Buck, the Swissie, the Yen and the Euro, respectively. The GBP/CAD edged lower only 0.14%, whereas the Sterling managed to add 0.71% versus the Kiwi, amid some negative news from the RBNZ.
The Bank of England kept interest rates on hold at 0.5% and warned that the UK's exit from the European Union would create uncertainty and likely hurt the British economy in the short term. The decision was unanimous. Former dissenter Ian McCafferty, who had insisted on a 25 basis point increase at every meeting between August and January, voted with the other eight rate setters for a third month in a row to keep the key rate unchanged. Experts are now expecting rates to stay at 0.5% until 2017, with some predicting a rate increase to come sooner if Britain votes to stay in the EU.
The central bank sees GDP growth at a mature 0.5% pace in both the first and second quarter of this year. The economic outlook has deteriorated since the beginning of the year due to worries about a slowdown in China, the world's second largest economy, and as oil and commodity prices remained under pressure. At the same time, the labour market remains tight, with the unemployment rate staying at a decade-low of 5.1% in the three months through January. The BoE sees some downside risk to labour market stemming from an expected near-term slowdown in GDP. BoE policymakers expect a drop in the inflation rate in April as the Easter impact unwinds.
US Industrial Production and Capacity Utilization Rate
GBP/USD: risks skewed to the downside
On Thursday the Sterling declined against the US Dollar, with the nearest support, namely the weekly PP, managing to limit the losses. Ever since the Cable bounced back from the five-week down-trend, the exchange rate kept edging lower. The weekly PP retains its role of the nearest support, but is unlikely to prevent the GBP/USD currency pair from falling deeper down. In this case the bearish momentum could extend towards the newly-formed falling wedge's support line at 1.4020, which is reinforced by the Bollinger band, the weekly and monthly S1s. Meanwhile, technical indicators are bolstering the possibility of the negative outcome.
Daily chart
Hourly chart
Sentiment remains bullish
Bullish sentiment remains unchanged at 64%, whereas the portion of orders to acquire the Pound increased from 45 to 54%.
Concerning the sentiment of other market participants, OANDA once again has a positive outlook towards the Cable, as 54% of their open positions are long, compared to 50% on Thursday. Meanwhile, the sentiment at Saxo Bank reached a perfect equilibrium, with 50% of all open positions now being long and the other 50% being short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months