According to the Officials figures, Britain's industrial output dropped in August while the trade deficit widened. The Office for National Statistics announced that industrial production decreased 0.4% in August after a 0.1% rise in July. The data was smaller, than economists' predictions of another 0.1% increase. It is evident, that export was spurred by the weak pound, which touched new 31-year lows against the dollar on Friday due to the worries over the UK's prospects outside the EU. Nevertheless, industrial production is only a small part of the UK economy. Manufacturing production, in turn, went up less than expected in August, by a seasonally adjusted 0.2% in August, worse than expectations for a gain of 0.5% and following a drop of 0.9% a month. The UK manufacturers have reported an advance in both domestic and overseas demand, but imports are now more expensive as sterling depreciates.
In the meantime, several economists have pointed to a series of surveys showing rising business confidence, as evidence that Brexit has not hit the economy. But, while sentiment has bounced back, hard figures on actual output have been less encouraging.
FOMC Meeting Minutes
GBP/USD attempts to begin recovery
Another hard sell-off of more than 200 pips occurred yesterday, causing the Cable to fall towards the 1.21 major level. The Pound appears to have regained the bullish momentum on the news of a much softer ‘Brexit' scenario. However, the Sterling faces a rather strong resistance on its path around 1.2240, represented by the Bollinger band and the monthly S3, which should prevent the pair from climbing back over the 1.23 level. On the other hand, today's FOMC Minutes could provide sufficient impetus for the 1.23 mark to be reclaimed.
Daily chart
Hourly chart
Traders mostly bullish
For two weeks now market sentiment remains bullish, now taking up 63% of the market (previously 61%). Meanwhile, the number of sell orders lost two percentage points, having fallen to a total of 61%.
A similar situation is observed elsewhere. For example, 57% of positions open at OANDA are currently long. This is more than the share of shorts (43%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 60% of traders being long and 40% 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 higher than the level where it is now. While the current price is around 1.23, the average forecast for January 12 is 1.2946. Furthermore, the 1.28-1.30 interval is now the most popular one, having 16% of the votes. On the second place in terms of the votes is the 1.32-1.34 (13%) interval, followed by the 1.22-1.24, 1.30-1.32 and 1.34-1.36 price ranges with 10% of the votes each. Moreover, 54% all survey participants believe the Cable is to fall under 1.30.