- The number of buy commands slid from 63 to 48%
- 47% of all positions are long
- 14% of traders assume the Sterling will cost between 1.42 and 1.44 dollars in three months
- The 200-day SMA at 1.5445 acts as the closest resistance, while the nearest support rests at 1.5349, namely the weekly PP
- Upcoming events: UK Official Bank Rate, UK Asset Purchase Facility, UK MPC Rate Statement
The Sterling was one of the best-performing currencies last Friday, as it appreciated against most major peers. The largest gains of 2.35% and 1.80% were registered against the Swiss Franc and the Euro, respectively. Slightly less, but still noticeably, the British currency added 1.41% versus the Yen, 1.38% versus the Buck and 1.12% versus the Aussie. The Loonie and the Kiwi stood most resilient, having lost 0.92% and 0.90% against the Pound.
The UK's trade deficit shrank in March after widening steeply in the previous month. The trade gap came in at 10.1 billion pounds in the reported month, according to the Office for National Statistics, following an upwardly revised 10.8 billion pounds in February. The deficit in March narrowed as exports rebounded slightly, while imports declined from February, according to the ONS. Exports increased 1.4% to 23.7 billion pounds, with sales to non-EU nations jumping 5.4%. Sales to the EU declined 2.9%, the ONS said. Imports dropped 1% on the month. Meanwhile, total trade deficit widened in the first quarter, pointing to sluggish overseas demand, which dragged down on economic growth in the beginning of the year. The trade gap on goods and services widened to 7.48 billion pounds from 5.97 billion pounds in the fourth quarter of 2014.
A separate report by Halifax showed UK house prices climbed 1.6% last month, with the annual rate of increase rising slightly to 8.5%, pointing to a recovery from a slowdown in late 2014 on the backdrop of low mortgage rates and strong economic growth. Both the monthly and the annual increases were the biggest since January. The average house price has increased to 196,412 pounds. However, Halifax said growth house prices in the three months to April was slower than in the previous three-month period and likely to decline further.
Francesca Panelli an analyst from Oxford Analytica, gives her opinion on the overall health of the UK. She said that "uncertainty related to the upcoming UK election may weigh down the services sector, because it's a very sensitive sector to political development." Francesca expects the UK economic growth to pick up later in the year. She elaborated that "the slowdown in services should prove transitory, we had better evidence from higher frequency PMI over the first quarter of the year, and so I think momentum could improve ahead."
Jamie Jemmeson, head of trading at Global Reach Partners, 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."
UK Official Bank Rate
Today there are no data releases concerning the US economy; however, the BoE is to make a statement about its decision on whether to raise interest rates or not. No change in rates is expected today, although the Central Bank also kept 375 billion of government bonds to further boost the UK economy. As a result, the Cable should appreciate again today.
David Starkey, market analyst from Cambridge Mercentile, 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 flat, at two-month high
Last Friday, the Sterling extended its rally against the US Dollar for the fourth consecutive day. Even though the GBP/USD pair stretched as far as 1.5522, the 200-day SMA was able to provide resistance and force the Cable to close at 1.5415. Technical indicators retain bullish signals, suggesting the pair is to rise again today. The 200-day SMA acts as the closest resistance, as it has prevented the Pound from surging several times in the past three weeks and might do so again today. As a result, we should not rule out a slump towards 1.5350, the weekly PP.
Daily chart
As the Cable reached a two-month high last Friday, it was unable to maintain its position and dropped down. Nevertheless, despite strong downside volatility, the 1.54 psychological level stopped the currency pair from falling deeper. However, the resistance trend-line is preventing the Sterling from appreciating, but a breach to the upside is expected in the middle of the day.
Hourly chart
Bearish sentiment unchanged
Market sentiment remains unchanged, with 47% of all positions being long. Meanwhile, the number of buy commands slid from 63 to 48%.
SAXO Group traders' sentiment worsened again, as 69% of positions are now short (previously 63%). Meanwhile, OANDA traders' sentiment remained unchanged, with 55% of positions being short.
Spreads (avg, pip) / Trading volume / Volatility
14% of traders assume the Sterling will cost between 1.42 and 1.44 dollars in three months
The mean forecast for August 11 is 1.5106, while the majority (52%) of survey participants expect the Sterling to cost more than 1.50 dollars in three months. The most popular price intervals is 1.42-1.44, chosen by 14% of the surveyed. The second most popular choice is taken by the 1.48-1.50 price interval, selected by 13% of the voters.