- Percentage of commands to buy the Sterling went up from 52% to 59%, indicating growing demand
- SWFX market participants remain equally divided between the bulls and bears
- 18% of traders still see the pair between 1.54 and 1.56 in three months
- Upcoming events: UK CBI Distributive Trades Survey and US Existing Home Sales Change on Monday, US Consumer Confidence and US Markit Services PMI, and UK Inflation Report Hearings on Tuesday
The Pound performed worse than most of its counterparts on Friday, as it lost 1.28% against the Swiss Franc and 0.73% versus the Aussie. However, the Sterling did surge 0.18% against the Canadian Dollar.
Retail sales in the UK dropped in January more than expected to the lowest level in 12 months, led by a decline in food sales. The 0.3% decline followed the 0.2% increase in December, despite the fact that UK High Street shops have been cutting prices in order to attract customers. Average store prices fell 3.1% compared with the same period last year. Meanwhile, online sales jumped 12% since last January. Sales excluding fuel dropped by 0.7% in January, below market predictions of a 0.3% fall. Measured on an annual basis, total sales soared 5.4%, marking the 22nd straight month of growth, while sales excluding fuel dropped 4.8%.
A separate report showed, the UK's public sector finances improved with income and corporation tax revues increasing the most since records began in 1997. Nevertheless, Chancellor George Osborne still faces a challenge to meet borrowing targets before the national election in May. According to the Office for National Statistics, the UK public sector net borrowing excluding financial interventions came out in surplus by 8.8 billion pounds in January, the largest surplus since January 2008. This was due to increases in income tax and capital gains tax receipts, which surged 6.1%, while corporation tax and VAT receipts also rose, but stamp duties fell. According to the Office for Budget Responsibility, the government's fiscal goal for this year is 91.3 billion pounds, which if reached would be around 6.3 billion pounds less than in the previous fiscal year.
Bank of England's Governor, Mark Carney, promised, that the UK would hit the Central Bank's 2% target within two years time, which is sooner than previously forecast. He also mentioned that current period of falling prices was temporary and fundamentally distinct phenomenon from deflation.
Anticipate US Consumer Confidence
Today the UK CBI Distributive Trades Survey and US Existing Home Sales Change figures are expected to be weaken. Tomorrow the US Consumer Confidence and UK Inflation Report Hearings are to be released, and may have a higher impact on the pair.
GBP/USD fell for second consecutive day
Mark Carney, Bank of England Governor, pre-warned consumers that a negative inflation rate will be temporary and the UK will not experience deflation. "Enjoy it while it lasts" – Mark Carney said.
The Sterling extended its decline on Friday, losing almost half of Wednesday's gain in two days. GBP/USD cross ended the trading day at 1.5391, after reaching a daily low around the 55-day SMA, which stopped the pair from falling further. The pair is likely to rebound this week, as the previous support is now bolstered by the weekly S1.
Daily chart
GBP/USD cross has been gaining ground since midnight, but seen slumping in the last few hours. Despite that the indicators are pointing south-ish in the shorter time frames, the daily one still suggests that the pair is likely to strengthen at the end of the day. Meanwhile, the closest supply zone is created by the 200-hour SMA and lower border of the Bollinger band around 1.5365.
Hourly chart
Perfectly neutral sentiment
SWFX market participants remain equally divided between the bulls and bears. Meanwhile, there is a growing percentage of commands to buy the Sterling. Over the weekend their share went up from 52 to 59%, indicating growing demand.
The sentiment among the SAXO Bank clients has more bull than bears, being that 56% of open positions are long. OANDA traders have a bullish outlook with respect to the Cable as well, as 62% of market participants are to profit from Sterling's appreciation.