The Sterling's bullish momentum was mostly reversed on Tuesday, with the UK currency sustaining losses against most major peers. However, the losses were rather mild, with the GBP/NZD declining 0.35%, the Cable edging 0.31% higher and GBP/CHF down 0.30%. Furthermore, the Pound suffered a 0.22% loss against the Loonie and 0.20% versus the Aussie. However, the British currency was able to outperform two major peers, namely adding 0.35% against the Euro and 0.47% against the Japanese Yen.
As reported by the US Census Bureau, there were 1.164 million constructions of residential buildings The UK Public Sector Net Borrowing figure improved with the latest release, which showed that the borrowing was at £9.7 billion in May, beating the £9.35bn forecast. Moreover, the April's data was also revised up to £8.2 billion from the initial £6.58 billion, meaning that it was significantly worse than first thought. An increase in the deficit has been detected mostly due to higher government spending, which rose to £56 billion, while central government investment rose up to 2.8%, followed by an increase in debt interest to 16.7%. There was also a downward revision to net borrowing in the preceding year, namely down to £74.9 billion, down £16.7 billion in comparison to the year before that, as reported by the Office for National Statistics.
Nevertheless, according to the Office for Budget Responsibility's March budget review, this figure is still above their target of £72.2 billion. The OBR also kept revising its medium-term forecasts, amid the government receipts failing to meet expectations, with them anticipating the government to miss its surplus target only starting from 2019. Overall, debt keeps rising, excluding taxpayer-backed banks, which was equal to 83.7% of GDP at the end of May, or £1.6 trillion.
Focus shifts to US data ahead of EU referendum
GBP/USD risks falling back under 1.46
Upon reaching the 23-month resistance line on Tuesday, the Cable bounced back, erasing its intraday gains and ending the day with a 28-pip decline. The main resistance area is still represented by the down-trend, but the GBP/USD pair also appears to be struggling to climb over the 200-day SMA. As a result, the upside movement is likely to be capped around 1.4750, while the bearish development could extend towards the cluster circa 1.4515, formed by the monthly PP and the weekly R1. Moreover, technical indicators are in favour of the negative outcome, as they retain bearish signals in the daily timeframe.
Daily chart
Hourly chart
Bears are now outnumbering the bulls
SWFX traders' sentiment remains bearish, now at 57% (previously 54%). Meanwhile, more and more pending orders in the 100-pip range are to sell the Pound ahead of the EU referendum, namely 85% today.
Compared to Monday, there are also slightly more bears at OANDA - they take up 54% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is still bearish, as here the number of bears exceeds the number of bulls by 20 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
Exactly half of traders (52%) believe the British currency is to cost 1.46 or more dollars after a three-month period. The most popular price interval was selected by slightly less than a fifth (15%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost between 1.50 and 1.52 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for Sep 22 is 1.4545.