- Difference between the buy and sell orders went up from 16 to 22 percentage points
- Difference between the amounts of bulls (53%) and bears (47%) remains minimal
- Traders are moderately bearish towards GBP/USD in the long term
- Upcoming events: US Labor Market Conditions Index, FOMC Member Powell Speech
Despite the disappointing news the Sterling balanced between the gains and losses on Friday. While the currency lost 0.58 and 0.55% against the Aussie and the Buck, respectively, at the same time it outperformed the Euro (+0.88%) and the Japanese Yen (+0.78%).
The British trade deficit ballooned to its biggest level since 2010 last year, as exporters were hit hard by the ongoing weakness in the Euro zone, the UK's main trading partner. According to the Office for National Statistics, the overall trade gap rose to 34.8 billion pounds in 2014, reflecting the 14,6 billion pound drop in exports over the year as well as the 7.3 billion pound decline in imports. In December alone, the shortfall rose more than expected, up from 1.8 billion pounds to 2.9 billion pounds. Despite declining oil prices, the value of oil imports rose largely due to significantly bigger volumes imported to the UK. Despite the unexpected increase of deficit in the total trade in December, the overall fourth quarter deficit narrowed the most since the end of 2011, as the trade in goods deficit contracted by 2.2 billion pounds, partly reflecting the smaller value of fuel imports. It is expected that the fourth-quarter trade data is likely to have a less negative impact on GDP compared to the third quarter results, when net trade deducted 0.2 percentage points of the total economic output.
Exports climbed 0.1% in December while imports soared by 2.7%, pushed up by a nearly 40% jump in the volume of oil imports on the month, reversing a trend of declining oil imports in previous months. Exports to countries outside EU in December fell, but these drops were largely compensated by a rise in exports to the US, Saudi Arabia and Japan, while imports from non-EU countries soared particularly from the US and Norway.
No high-impact events
There are no important events scheduled for today, meaning the volatility of GBP/USD is likely to be depressed. However, tomorrow the Office for National Statistics is to release the Manufacturing Production PMI, the growth of which is expected to decelerate from 0.7 to 0.3%.
GBP/USD pulls back beneath 1.53
Simon Smith, Chief Economist at FXPro, advises not overestimate bullish potential of the US Dollar in 2015. According to him, "we will see Dollar strength through the year, but it's going to be a very difficult year in terms of trends".
As for the Sterling itself, Charles Purdy, CEO of Smart Currency Exchange, sees weakness in the nearest future, arguing that "the UK election will count against Sterling" in terms of "higher levels of uncertainty". According to the analyst, GBP/USD is likely to fall to 1.46 by the end of March. However, in a year he expects the exchange rate to recover to 1.48, after the BoE hikes the interest rates in the second half of 2015.
Daily chart
GBP/USD failed to sustain a rally beyond the multi-month up-trend, erasing most of its Thursday's gains on Feb 6. The immediate support is now at 1.52, formed by the weekly and monthly PPs, but at the same time the upside should be limited by the resistance at 1.53. Additional selling pressure may push the price down to 1.5140, and the next significant support will be only around 1.50 (late January lows).
Hourly chart
Sentiment from neutral to slightly bullish
The difference between the amounts of bulls (53%) and bears (47%) remains minimal, meaning the sentiment is still neutral. However, the difference between the buy and sell orders went up from 16 to 22 percentage points, indicating the buying pressure may well be currently building up.
The attitude towards GBP/USD at OANDA and SAXO Bank appears to be more optimistic. The share of open long positions as reported by the brokers is 56 and 57%, respectively, though there were fewer bulls last week.