- The number of purchase orders in the 100-pip range edged down from 57 to 49%
- 64% of all open positions are now long
- The nearest resistance is located at 1.4288
- The Bollinger band, the monthly S2 and the weekly S1 form support circa 1.41
- 54% of traders reckon GBP/USD will be at 1.46 or higher in three months
- Upcoming events: UK Retail Sales, BoE Monetary Policy Summary, BoE Official Bank Rate, Asset Purchase Facility, US CPI and Core CPI, Philly Fed Manufacturing Index, US Jobless Claims, US Current Account, BoE Governor Carney Speech
The Sterling managed to recover from some of the losses ahead of the BoE Monetary Policy Meeting, being that it surged against most major peers on Wednesday. The Pound gained the most against the Loonie, despite that the Canadian Manufacturing Sales surprised with stronger data. The GBP/CAD inched 0.95% higher, followed by a 0.64% gain against the US Dollar, 0.54% versus the Yen and 0.43% against the Swissie. Against other commodity currencies, however, the British currency struggled to post large gains, as the GBP/NZD edged 0.04% higher, while the GBP/AUD dropped 0.04%, being the only Sterling-cross loss.
Unemployment in Britain declined to the lowest level since October 2005, indicating that the UK labour market has continued to tighten. The jobless rate slid to 5% in the three months through April, according to the Office for National Statistics. The decline came as a surprise to economists, who had predicted the reading to remain unchanged at 5.1%. Employment was strong in the reported period, surging by 55,000, with the employment rate remaining at a record high of 74.2%.
The claimant count rate was unchanged at 2.2% following a revision for April, the ONS reported. At the same time, wage growth, excluding bonuses, unexpectedly gathered pace in the three months to April to a 2.3%, from a revised 2.2% reported in March. When bonuses are included, the rate of pay growth also remained steady at 2% compared with economists' expectations for a decline to 1.6%. Wages, however, have remained significantly below the levels seen before the financial crisis. Low inflation has undermined earnings growth as it limits workers' bargaining power with employees. The pace of wage growth is unlikely unnerve the BoE's officials, who are predicted to keep the key rate at a record low 0.5% later in the day. They are watching closely the labour market for signs of tightening, which in turn could boost inflation.
BoE Meeting, US CPI and Core CPI, US Philly Fed Manufacturing Index
Among important data today the most important from the UK is the BoE Monetary Policy Meeting, where MPC members decide to on the short-term interest rates and discuss the future outlook of the UK economy. From the US side, the CPI data is due. The US CPI is released by the US Bureau of Labor Statistics. It is a measure of price movements by the comparison between the retail sales of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The Core CPI excludes Food & Energy sectors. Second, the Philadelphia Fed Survey, which is a spread index of manufacturing conditions (movements of manufacturing) within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of The ISM Index.
GBP/USD remains under pressure
The Sterling managed to partially recover from this week's losses yesterday, but despite the rally, the overall trend remains bearish until the EU referendum next week is over. As a result, the British Pound is likely to weaken against the US Dollar today, with the 1.41 major level remaining the main target. This level is also reinforced by the Bollinger band, the monthly S2 and the weekly S1, making demand around that area sufficient to prevent the pair from depreciating further. Technical indicators, on the other hand, retain mixed signals, unable to confirm the outlook.
Daily chart
The GBP/USD currency pair keeps sliding down, in spite of yesterday's small moment of ‘clarity'. The Pound is also supported by a trend-line, which should limit the losses if the exchange rate drops below the 1.41 major level.
Hourly chart
Bulls and bears remain in balance
Market sentiment barely changed over the day, as 64% of all open positions are now long (previously 65%). At the same time, the number of purchase orders in the 100-pip range edged down from 57 to 49%.
Compared to Tuesday, there are also slightly more bulls at OANDA - they take up 55% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is now bearish, as here the number of bears exceeds the number of bulls by six percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
The majority of traders (54%) believe the British currency is to cost 1.46 or more dollars after a three-month period. The most popular price interval was selected by slightly less than a fifth (17%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost between 1.52 and 1.54 in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for Sep 16 is 1.459.
The consensus forecast for Friday stands at 1.434, almost in line with the last week's average price of 1.44. The number of those who expect the pair to appreciate or move to the south, is almost equal to each other.
Nuonrg believes that the British Pound is to edge higher against the by week's end. "The Pound has come down into the neckline from the daily head and shoulders pattern. Although the Cable is weak on Brexit danger," he said, backing up his outlook.
Meanwhile, rokasltu thinks that the Sterling is to weaken against the US Dollar by Friday. Rokasltu said the following: "As Brexit chances seems to be increasing I think GBP will be under pressure during next week. In my opinion GBP/USD might decrease by few hundred pips during this week."