Hopes of the UK remaining in Europe provided support for the British currency on Monday, helping it outperform most major peers. The Sterling gained the most against the Japanese Yen and the Swiss Franc, adding 0.62% and 0.49%, respectively. At the same time, mild gains were registered versus the US Dollar (0.26%), the Euro (0.16%) and against the Aussie (0.04%). However, against the remaining commodity currencies, namely the Kiwi and the Loonie, the Pound suffered a 0.07% and 0.08% loss, respectively, amid an increase in oil prices.
Official data showed that the New York Federal Reserve's index of manufacturing conditions contracted for the first time in three months in May, as new orders and shipments turned negative. The general business conditions index fell to -9 in May, contrary to analysts' prediction of a modest pullback to 6.5 points from April's 9.56 points. The previous reading had been the indicator's highest since January 2015. The figures suggest that factories in the state continue to struggle despite growth in March and April. Factory output nationwide has been sluggish in the past year as a weak global economy has lowered exports and US businesses are spending less on equipment and machinery. The new orders and shipments indexes also pointed to a decline in both orders and shipments. A measure of new orders fell to –5.5, from 11.1 the previous month. Also, a gauge of shipments slipped into negative territory, falling to minus 1.9 from 10.2. Moreover, employment levels appeared to be little changed, while the average workweek index pointed to a decline in hours worked.
Thus, the so-called Empire State index suggests that the recovery from the US manufacturing recession will be sluggish at best. The average for the second quarter thus far, at 0.27 points, is slightly better than the -11.8 points logged in the first quarter.
UK CPI and PPI Input, US CPI and Building Permits
GBP/USD attempts to retake 1.45
Demand, represented by the 100-day SMA, was sufficient yesterday to trigger a rebound, but with the 1.44 major level barely retaken. The GBP/USD pair remains driven by concerns of the upcoming EU referendum, and increasing support of ‘Bremain' keeps providing the pair with more strength. Technically, the Cable has the potential to reclaim the 1.45 mark, unless the second resistance area around 1.4482 limits the gains. On the other hand, technical indicators retain mixed signals, suggesting that more positive US fundamentals could cause the Sterling to retreat from intraday gains and fall back under 1.44.
Daily chart
Hourly chart
Bears now in the majority
Market sentiment shifted to the bearish side, as 51% of all open positions are now short, compared to 43% on Monday. The share of sell orders keeps growing; they now take up 71% of the market.
At OANDA market sentiment weakened over the weekend, as 53% of their open positions are long, and the remaining 47% are short. Meanwhile, the sentiment at SAXO Bank broke out of the equilibrium, with bears now in the majority, taking up 57% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months