- The share of buy orders added ten percentage points to 54%
- 49% of traders have a positive outlook towards the Sterling
- 19% of the poll participants expect the British Pound to cost between 1.60 and 1.62 dollars after a three-month period
- Immediate resistance lies in face of the weekly R1 at 1.5638
- The nearest support rests around 1.5594, represented by the monthly PP
- Upcoming events today: US Chicago PMI, US Employment Cost Index, US Revised UoM Consumer Sentiment
The Sterling remained as one of the best-performing currencies on Thursday, as it advanced against most major peers. The British Pound gained the most versus the Kiwi, namely 0.79%, following with 0.46% and 0.40% gains against the Loonie and the Euro, respectively. Furthermore, the Sterling remained relatively unchanged against the US Dollar, adding 0.03%, and the Aussie, adding 0.04%.
Growth of British annual sales weakened in July, despite a big surge in clothing purchases, the Confederation of British Industry reported. The CBI distributive trades survey's retail sales balance dropped for a second straight month after sliding to the lowest level in five months in May, declining to +21 in July, compared with +29 in the prior month, falling short of economists' forecasts for a modest rise to +30. The outlook for sales in August was even gloomier, with the corresponding gauge declining to a two-year low of +13 from +33. According to the latest official data, retail sales, both including and excluding fuel, decreased 0.2% between May and June. Despite the continuous quarterly growth, total retail sales volumes slowed during the April-June period to 0.7%, down from 0.9% in the first three months of the year.
The retail sector and overall domestic consumption in the UK has been considered one of the key drivers for the economy. Expectations for domestic spending in the country have been mixed recently, with some analysts warning it could weaken even further once the Bank of England starts to hike its benchmark interest rate from the record low of 0.5%, given the burden of household debt and rising house prices. A separate report showed net lending to individuals and households rose more than expected in June, reflecting increased demand for credit. The BoE said total net lending to individuals increased by 3.8 billion pounds last month, up from 3.5 billion pounds in April.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
Revised UoM Consumer Sentiment
With no economic data releases concerning the British currency, attention should be paid to the US side. Although there will not be any high-impact events, a number of medium ones are likely to influence the Cable. The US Employment Cost change is forecasted to deteriorate slightly, while the Chicago PMI, on the contrary, to improve. Despite this mixed data expectations, the most important release will be the Revised UoM Consumer Sentiment. The Consumer Sentiment is also forecasted to improve and it even showed better-than-expected figures during most of the releases in 2015. Weak data today could rehabilitate the GBP/USD from the morning's slump and cause the pair to resume trade around 1.56.Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD hovers above 1.56
The GBP/USD currency pair experienced some volatility yesterday, amid mixed US fundamental data. As a result, the Cable remained relatively unchanged, as the Sterling added only four pips against the Greenback. Furthermore, the weekly PP prevented the pair from edging lower by the end of the month and is likely to do so again today, in spite of mixed technical indicators. Trade is expected to close above the 1.56 level and possibly at 1.5638, namely the weekly R1, if the US fundamentals disappoint.
Daily chart
The support trend-line helped the Cable to remain close to the 1.56 level yesterday. Even though the pair was seen edging higher in the early hours, the trend-line is expected to be breached, along with the 200-hour SMA. However, the worse-than-expected fundamentals could still push the Sterling back up afterwards.
Hourly chart
Bears outnumbering the bulls
Bulls keep pushing forward, as there are now 49% of traders with a positive outlook towards the Sterling. The share of buy orders added ten percentage points. The orders now take up 54% of the market.
Other market participants now have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment slightly improved, but remains bearish, as 56% of all their positions are now short. At the same time, OANDA's market sentiment shifted to the bearish side, with 53% of traders being short the Sterling.
Spreads (avg, pip) / Trading volume / Volatility
19% of the poll participants expect the British Pound to cost between 1.60 and 1.62 dollars after a three-month period
According to the survey conducted between June 31 and July 31, 19% of traders assume the GBP/USD currency pair will cost between 1.60 and 1.62 dollars within three months. However, the second place is taken by the 1.58-1.60 price interval, selected by 15% of the surveyed. The mean forecast for October 31, on the other hand, is 1.5676.
Traders' predictions changed dramatically from the previous week, as now 71% of Dukascopy Community members are predicting the pair to decline. Alongside, the average forecast for the end of the week is placed around the 1.554 level.
From the larger [bearish] side, Rivan, one of the community members, stated that in his opinion the Economic data is not strong enough to support the hawkish BoE, therefore, he expects the US Dollar to outperform the Sterling by the end of the week. However, there are those with an optimistic view towards the Cable, namely Tommaso, another member of the Dukascopy community. "The bullish trend line seems still intact and can reach 1.5775 level." He also mentioned that the Dollar and British Pound are showing the same strength, thus, only really important economic releases can reverse the bullish trend.