- The number of buy orders edged up one percentage point; the commands now account for 48% of the market
- Less traders, namely 43% of them, are now long the British currency
- Mean forecast for July 13 is 1.4889
- Nearest resistance lies around 1.47 psychological level, while closest support rests at 1.46
- Upcoming events: UK CPI, RPI and PPI, US Retail Sales and Core Retail Sales, US PPI, US Core PPI, US Business Inventories
The British Pound retained its title of the worst performer on Friday, as it declined against most major peers. The sharpest losses were recorded against the Yen (0.85%), the Loonie (0.65%) and the US Dollar (0.55%). However, the Sterling remained relatively unchanged versus the Euro (-0.01%).
Industrial production in Britain barely grew in February, as a rise in manufacturing activity was outweighed by a decline in oil and gas. Industrial output climbed 0.1% as energy output fell 3.8%, according to the Office for National Statistics, below a 0.3% increase expected by analysts. The data suggest the industrial sector faltered in the beginning of the year, with output in the three months through February inching up just 0.2%. Meanwhile, the UK manufacturing production rose 0.4% in the reported month, with gains in seven of the 13 manufacturing sub-sectors. The largest contributor was the manufacture of transport equipment, which climbed 1.6% on the month, whereas the area with the biggest drop was the manufacture of basic pharmaceutical products. In addition to that, British building activity continued to slow in February, with construction output unexpectedly falling 0.9% in the reported month. Measured on an annual basis, building industry contracted 1.3%, marking the second consecutive annual decline in construction industry growth.
The recent data suggests Britain's economic growth probably slowed in early 2015, potentially adding to challenges for Prime Minister David Cameron to persuade voters to grant his party power to run the economy.
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.
UK CPI to stay unchanged
There are no relevant data releases scheduled for Monday; however, the Office of National Statistics in the UK is to release the CPI on Tuesday. The inflation is expected to remain flat at 0%. This rises concerns over deflation in the United Kingdom, and may pressure the Sterling against the Greenback.
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 closes in on 1.46
Despite the expectations, the currency pair crossed the 1.47 level at the end of the last week. The Sterling declined more than anticipated, as it pierced through the weekly S2 and even tested support at 1.4586. However, the trading session ended with the Pound settling at 1.4629. The technical studies are giving mixed signals; however, there is likely to be a further slump. The 1.46 barrier acts as the closest support level, although a fall towards 1.45 is also possible.
Daily chart
For the past three weeks the British currency has been in a strong down-trend. The resistance line was challenged on several occasions, but none of tries were successful. Accordingly, the 1.46 level is likely to be reached today.
Hourly chart
Bulls retreat
Market sentiment slightly deteriorated, as less traders, namely 43% of them, are now long the British currency (previously 45%). At the same time, the number of buy orders edged up one percentage point; the commands now account for 48% of the market.
Market sentiment of SAXO Group traders broke out of the perfect equilibrium, as 51% of all positions are now long. At the same time, OANDA traders are less confident in the Sterling, with 57% of being long the Pound.
Spreads (avg, pip) / Trading volume / Volatility
Mean forecast for July 13 is 1.4889
According to the survey, taken between March 13 and April 13, the Sterling is expected to cost 1.4889 dollars in three months. The most popular price interval was 1.44-1.46, chosen by 17% of the traders. The second place is tied between two intervals: 1.48-1.50 and 1.54-1.56, both selected by 13% of traders. Nonetheless, only 40% of the surveyed expect the Pound to cost more than 1.50 dollars.