- The gap between the buy and sell orders narrowed, as 47% (previously 40%) of commands in the 100-pip range are set to acquire the Pound
- Market sentiment remains unchanged, with 46% of positions being long
- 17% of traders see GBP/USD at 1.54/1.56 in three months
- Closest resistance is located at 1.4918, represented by the weekly PP, while nearest support rests around 1.4808, at the 2013 low
- Upcoming events: UK MPC Member Haldane and Broadbent Speeches, BoE Gov Carney Speech, US FOMC Member Fischer Speech, US Final GDP, US Revise UoM Consumer Sentiment, Fed Chair Yellen Speech
The British Pound experienced mixed performance over Thursday. The Sterling added 0.58% versus the Euro and 0.13% versus the Swissie. However, losses of 0.50% and 0.46% were registered against the Loonie and the Yen, respectively. The Sterling remained relatively unchanged against the Aussie, edging down 0.01%.
Volume of retail sales in the United Kingdom climbed considerably more than market expected in February amid by lower inflation and improving consumer confidence in the country, with all categories of sales showing gains. All in all, British retailers sold 0.7% more goods and services in the previous month, even though analysts expected the indicator to add only 0.4% on a monthly basis. The same growth number was registered by the retail sales indicator which excludes fuel. Annual gain, in turn, accounted for as much as 5.7%, far above than 4.7% estimated by economists. In addition, sales' volume for January was revised upwards, from a decline of 0.3% up to an increase of 0.1%. Consumer spending in the UK is being provided with positive impetus by rising confidence in sustainable economic growth, falling gasoline prices and rising real wages. Inflation fell to as low as zero last month, while prices of shop goods dropped by 3.6% on the annual basis, measured by the deflator, the fastest downward change since 1996.
Meanwhile, Confederation of British Industry announced a better than forecasted advance in the index for realised sales. This indicator, calculated by surveying 125 retail and wholesale companies, jumped to 18 points in March, up from just one point a month ago. A reading above zero speaks for higher sales volume, which indicates that consumers are prepared to spend more even despite a threat of deflation the nearest future.
Nicholas Ebisch, Corporate Account Manager at Caxton FX, agrees with Mark Carney's statement before the House of Lords Economic Affairs Committee that "at this point it would be foolish for the BoE to cut interest rates," since it would "add unnecessary volatility to inflation." Ebisch also mentioned that the BoE Governor's use of the word 'foolish' shows that "the MPC is firmly against the interest rate raise at this time."
US Final GDP and Yellen's Speech
Even though there are several UK officials' speeches today, the most important events are still the US Final GDP and Fed Chair's Speech. The GDP growth is expected to accelerate, thus potentially giving boost to the Dollar. However, Yellen's speech in the evening will have the concluding effect on the US currency.
David Starkey, Senior Market Analyst from Cambridge Mercantile Group, commenting on the Fed removing 'patience' from Fed's interest rate guidance, said that "Yellen lowered expectation for GDP, inflation, and as such – the trajectory of Fed rates." He noted that "in December the last economic projections were that the Fed rates would be over 1% at the end of 2015." However, the most recent data showed the Fed now only expects rates to go as high as 0.625% by the end of 2015. "As such, the overall result was Dollar-negative," he explained.
GBP/USD surprised to the downside
Yesterday, the Cable retreated in spite of all the fundamental factors. GBP/USD tested the 2013 low, which stopped the pair from falling deeper. Moreover, Wednesday's gains were completely negated. The technical studies proved to be more reliable, and right now they are pointing south, suggesting a further slump. The Sterling can easily reach the 2013 low; however, the level at 1.48 is unlikely to be pierced.
Daily chart
Even though the Cable reached and surpassed the January low at 1.4951, it was only for a brief moment. Ultimately, the Sterling declined versus the Greenback and even tested the 2013 low. At the moment the Pound is fluctuating around the 200-hour SMA, awaiting the fundamental data to shift in either direction (most likely to the downside).
Hourly chart
Bearish sentiment unchanged
Market sentiment remains unchanged, with 46% of positions being long. At the same time, the gap between the buy and sell orders narrowed, as 47% (previously 40%) of commands in the 100-pip range are set to acquire the Pound. /p>
SAXO Group traders' sentiment slightly improved, but still remains bearish, as 52% of participants are short the Sterling. OANDA traders' long/short ratio almost reached an equilibrium, although 51% of participants still have a bullish outlook towards the Pound.
Spreads (avg, pip) / Trading volume / Volatility
17% of traders see GBP/USD at 1.54/1.56 in three months
Concerning the outcome of this week, the votes of Dukascopy Community members are divided nearly equally. Almost 50% of all predictions stay bearish and another 50% remain bullish. Meanwhile, the traders expect the Cable to close around the 1.4879 level this Friday.
One of the community participants, rokasltu, expects the GBP/USD to be at least over the 1.50 level. He bolstered his outlook by saying that "the pair managed to recover a substantial fall." Daytrader21, on the other hand, has a bearish perspective on the Pound. He thinks that "the broad based Dollar strength is still fully in motion." Although in the shorter term "the market seems more prone to consolidation before resuming the bearish trend," he added.