Britain's current account deficit grew less than expected in the Q2 of 2016, official figures revealed on Friday. According to the UK Office for National Statistics, the country's current account gap widened to 28.7 ($37 billion) billion pounds in the Q2, which accounted for 5.9% of GDP for the period, slightly up from 5.7% seen in the Q1. At the end of 2015, the deficit hit its record high of 7%. The preceding quarter's deficit was revised to 27 ($35 billion) billion pounds from the originally reported 32.6 ($42.3 billion) billion-pound gap. Market analysts expected Britain's current account deficit to hit 30.5 ($39.6 billion) billion pounds in the reported quarter.
Meanwhile, the British economy expanded 0.7% in the Q2 of 2016, according to the final figures release by the ONS on the same day, up from July's estimate of 0.6%. On a yearly basis, the UK economy grew 2.1% in the Q2, following the July estimate of 2.2%. The GDP growth of 0.7% in the Q2 was mainly driven by services and production, whereas agriculture and construction did not provide sufficient support. Back in July, the ONS's forecast was that the economy would grow 0.5% quarter-over-quarter and 2.1% year-over-year in the Q2.
UK and US Manufacturing PMIs
GBP/USD in tight range between 1.29 and 1.2970
Friday ended with the Cable remaining relatively unchanged, as the post-Brexit down-trend limited the gains. Nevertheless, the GBP/USD pair opened with a bearish trend today, but the five-week support line keeps preventing the given pair from edging lower. Furthermore, the support line is also reinforced by the weekly S1, thus, a downside development would be difficult to realise, despite technical indicators retaining bearish signals. However, in case the immediate support area fails to hold, the 1.2882 level should be seen as a potential psychological support level, which kept the Sterling elevated since July.
Daily chart
Hourly chart
Traders remain undecided
SWFX traders' sentiment remains bullish, with 61% of all open positions being long (previously 57%). The share of purchase orders also improved, having risen from 44 to 52%.
A different situation is observed elsewhere. For example, 74% of positions open at OANDA are currently long. This is more than the share of shorts (26%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 69% of traders being long and 31% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is around 1.30, the average forecast for January 03 is 1.31. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, having only 10% of the votes. Most of the votes are concentrated in 1.28-1.30 (21%) intervals. Furthermore, 51% all survey participants believe the Cable is to fall below 1.30.