- 45% of all orders are now to acquire the Pound, compared to 42% yesterday
- More traders are now long the British currency, namely 42% of them (previously 41%)
- 15% of traders expect the Sterling to cost between 1.44-1.46 dollars after three months
- Nearest support lies at 1.4991, represented by the 55-day SMA, while closest resistance rests at 1.5105, namely the Bollinger band and the 100-day SMA
- Upcoming events: US Durable Goods Orders, US Durable Goods Orders ex Transportation
The Sterling experienced mixed performance over the day, mostly declining, but also appreciating against some major peers. The Pound added 1.08% and 0.13% versus the Kiwi and the US Dollar, respectively. Losses were detected against the Swiss Franc (1.62%), the Euro (0.78%) and the Loonie (0.62%). Furthermore, minor declines of 0.17% and 0.14% were registered versus the Aussie and the Yen, respectively.
Retail sales in Britain unexpectedly declined last month, driven down by a plunge in sales at petrol stations. According to the Office for National Statistics, the volume of sales including auto fuel fell 0.5% in March. In contrast, economists had forecast a 0.4% rise. Excluding petrol, sales climbed 0.2% in March, versus a 0.6% increase in February, which was revised down from an initial estimate of 0.7%. For the three months through March of 2015, sales edged up 0.9%, down from 2.2% in the first quarter of 2014. Economists said the retail data could herald slower growth in the beginning of the year. UK economic growth data for the first three months of 2015 are due to be published next week.
A separate report showed the budget deficit in the fiscal year ended March narrowed more than expected. The shortfall was the smallest for any March in 11 years. Net borrowing excluding public-sector banks came in at 7.4 billion pounds. Government coffers in March were filled by an increase in receipts from income and corporation tax, as well as VAT receipts. Revenue increased 3% and spending declined 3.1%. It resulted in the full-year deficit at 87.3 billion pounds, below the 90.2 billion pounds, the Office for Budget Responsibility estimated last month. The OBR predicts public sector borrowing to fall each year to eventually reach a slight surplus in 2018-19.
In light of the recent data, Ian Stewart, chief economist at Deloitte, reckons "the UK has quite good momentum," which largely stems from the exports and the consumer. He also sees "decent recovery" in the investment, and this is likely to result in the UK being "one of the fastest growing economies in Europe." At the same time, Steward does not consider the elections to be a major risk factor for this recovery, though he does acknowledge a likelihood of greater volatility in financial markets in the run-up to the general election.
According to the economist, the general effect of strong economic data out of the UK should be supportive of the Sterling, particularly against the Euro, while concerning the speculations on the UK leaving the European Union, Stewart thinks this is a low-probability event, with the chances that are "well below 50%," since most political parties and a large portion of business and media would likely campaign in favour of continued membership.
Jamie Jemmeson, head of trading at Global Reach Partners, talks about the upcoming elections in the UK. He says that the UK is sailing into murky waters right now, with no clear definition of what is going to happen next. Jamie adds that this is also going to lead to more Sterling volatility, so the investor has to be cautious.
He also gave his prospects on the effect the elections might have on the British currency: "I think that generally in terms of you looking at Sterling volatility, a Tory Government would be more positive for the Pound." He still mentioned that "Generally, if you look at historically how the Pound has re-answered, it prefers a Tory Government."
US Durable Goods Orders
The main event for Friday is the US Durable Goods Orders data release. The figures are expected to show improvements, indicating an increase in goods purchases. However, historical data shows disappointment in the portion of orders. The pattern has a solid chance of repeating, thus weakening the Greenback once more.
David Starkey, market analyst from Cambridge Mercentile, said that the BoE is most likely going to leave the rates unchanged. However, he also mentioned that "there is certainly a bit of dissent amongst the BoE, their chief economist suggested that there could be room for a cut if inflation continues to track negative, while Carney has openly and publicly suggested that the next move is going to be a hike." The analyst also gives his prospects for the near future, saying that "dissent is probably good, the BoE is going to be analysing the situation closely, the majority of the members still lean towards a hike, one descending voice does not suggest that it is going to be a cut in the near term."
GBP/USD keeps climbing up
Yesterday, the Cable slightly underperformed, as it was unable to reach the initial resistance level. Moreover, downside volatility stretched out towards 1.4950, rather than 1.50. At the end of the day the GBP/USD pair closed at 1.5051. Today's perspective towards the Sterling is bullish. A surge is likely to occur amid soft fundamental data from the US, which showed worse-than-expected figures in the previous five months. The resistance cluster shifted slightly higher to 1.5105. Meanwhile, technical studies retain their mixed signals.
Daily chart
For the past three days the GBP/USD pair has been rising. The bias has been positive for the past two weeks. Today the Pound is likely to attempt to overcome the Wednesday's high. The trend-line has forced the pair to bounce back several times during this week, so breaking through it will require some effort.
Hourly chart
Bears still prevailing over bulls
More traders are now long the British currency, namely 42% of them (previously 41%). The gap between buy and sell commands narrowed, as 45% of all orders are now to acquire the Pound, compared to 42% yesterday.
There are even more traders among SAXO Group clients with the bearish outlook towards the Sterling, as 67% the positions are short (previously 65%). Meanwhile, OANDA traders' sentiment is in a perfect equilibrium.
Spreads (avg, pip) / Trading volume / Volatility
15% of traders expect the Sterling to cost between 1.44-1.46 dollars after three months
The majority of the community members, namely 62%, expect the Sterling to cost less than 1.50 dollars after three months. According to the survey, conducted from March 24 to April 24, the most popular price interval was 1.44-1.46, chosen by 15% of the participants. The second most popular price range was 1.46-1.48, selected by 14% of the surveyed, while just one percentage point less, 13%, assume the Pound will cost between 1.42 and 1.44 dollars in three months.
In a week time, sentiment on EUR/USD did not changed, even became more bearish, as now 64% of traders predict the Pound to lose value.
Aslamhammad, one of the community participants, has a positive outlook towards the Cable this week. He commented that the US Dollar began to weaken, thus there is a possibility of the GBP/USD to exchange higher this Friday. RahmanSL, on the other hand, expects the pair to fall down. He said that "recent gains of Cable are due to steep fall in the European session, as a fresh bid wave caught the US Dollar pushing the Sterling higher across the board." RahmanSL also mentioned that the Greenback was boosted by concerns over the Chinese growth outlook, after the weak Chinese data release.