GBPUSD news - page 35
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UK Construction Falls in Q4, as House Building Moderates
Moderation in the UK housing sector partly led to a slowing of new orders, pushing down on the overall performance in the total construction in the UK, which declined between the third and fourth quarter of 2014 by 2.1%. This fall is 0.3 percentage points deeper than first estimated, new data from the Office for National Statistics (ONS) showed today.
However, the ONS analyst said that this downward revision should not have a real, one decimal, effect on the first estimate of the UK gross domestic product (GDP) which so far stands at 0.5%. The second estimate, which will include expenditure data, is due to be published later in February.
Between November and December, construction output increased 0.4%, following declines of 1.8% and 1.5% in November and October respectively. Despite the quarterly fall, the construction sector was stronger at the end of 2014 when compared to a year ago, with the output rising 4.8% in the final three months of 2014 when compared with the same quarter a year ago.
According to Markit's PMI survey, construction sector business activity picked up pace at the start of 2015. The headline PMI index jumped above estimates to 59.1 in January, up from 57.6 in December with new business rising but job creation easing to its weakest for thirteen months.
“Stronger trends were recorded across housing, commercial and civil engineering, although each category of activity still experienced much slower growth than the high-water marks achieved last year. In short, the peak speed of the construction recovery seems to be over, but reports of its death have been greatly exaggerated,” Tim Moore, Markit's senior economist, commented on the January PMI report.
Overall UK GDP slowed to 0.5% in the fourth quarter from 0.7% in the previous three months, according to the first estimate. Low inflation and stronger consumer spending are expected to add more strength to the second estimate.
Also, the latest ONS data on industrial production, released earlier this week, showed an upward revision to the overall output in the fourth quarter although this upward revision should also have no significant, i.e., one decimal, impact on the second revision to the total GDP growth.
In its February Inflation Report forecast, the Bank of England (BoE) said it expected growth in the fourth quarter to come in at 0.6% after the final estimate. The BoE is upbeat on growth as it left 2015 annual GDP unchanged at 2.9%, but revised up 2016 growth to 2.9%, from the 2.6% estimated in its November forecast. It also said cheap oil should help boost real income and consumers' spending.
According to the National Institute of Economic and Social Research (NIESR), the UK economic growth accelerated to 0.7% in the three months to January, after a downwardly revised 0.5% measured in the quarter to December.
In its GDP estimate, NIESR said “this was predominantly driven by growth in private services” with consumer spending "expected to contribute significantly to GDP growth in 2015, supported by improvements in purchasing power emanating from the sharp drop in global oil prices."
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GBP/USD forecast for the week of February 16, 2015
The GBP/USD pair broke higher during the course of the week, and as a result the market looks as if it’s reaching for the 1.55 handle. That is an area that has a significant amount of resistance, and as a result we are actually looking for a selling opportunity in that general vicinity. In fact, we can’t buy this market until we get above the 1.58 level, which is something that we do not anticipate seeing anytime soon. With that, we are bearish and ignoring the bullish pressure that we’ve seen recently.
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GBP/USD Forecast Feb. 16-20
The British pound posted its third straight weekly gain, as GBP/USD gained about 150 points last week. The pair closed at 1.5383. This week’s highlights are CPI and Claimant Count Change. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.
The pound posted strong gains on the BOE inflation report, which said that inflation levels would improve and wages were starting to pick up. It was a rough week for key US numbers. Jobless claims jumped above the 300 thousand level and retail sales and consumer confidence softened.
Updates:
GBP/USD graph with support and resistance lines on it. Click to enlarge:
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BoE Prepares Markets for Earlier Rate Hike
The UK inflation rate hit the record low of 0.5% in December and is expected to fall further at the start of this year, as a sharp decrease in oil prices over the second half of 2014 have translated into cheaper fuel and falling food prices.
However, policymakers expect these downward pressures to be only temporary while arguing that the strength of the underlying growth at home and abroad, as well as the tightening of the UK labor market, should sooner or later result in sharper price pressures at home.
While speaking during the Inflation Report (IR) press conference last week, Bank of England (BoE) Governor Mark Carney said "inflation is at its lowest level since the introduction of Inflation Targeting two decades ago ... It will likely fall further, potentially turn negative in the spring, and be close to zero for the remainder of the year."
But Carney also sent a strong hawkish sound wave across the markets saying "the headlines today mask stronger underlying dynamics which will determine UK output and inflation tomorrow."
In the February IR forecast, the BoE did lower the near term inflation on cheap oil but also said that inflation would overshoot the 2% target by the middle of 2017 if the curve was to reflect market interest rates expectations, which shows the first hike to come as late as in the third quarter of 2016 - the time the BoE thinks has been pushed back too far.
In an op-ed he wrote on Sunday, external BoE rate-setting Monetary Policy Committee (MPC) member Martin Weale said that in his view, "rates will also have to rise somewhat earlier than market participants currently expect."
Weale, together with MPC member Ian McCafferty, voted for a rate hike August through December, but they both dropped their votes in January due to what he called his concern that "the expectations of low inflation might become built in" as oil prices continued to sink. But Weale also said he still sees the risks of higher inflation to come sooner than the MPC's central view suggests.
In the article Weale wrote for the Observer, he also reiterated that in case low inflation persists, the BoE can cut the rate further below 0.5% to spur inflationary pressures, given the improved capital resilience of the UK banks to super low rates.
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GBP/USD: Pound Extends 2015 Highs
Britain's pound extended its gains on Monday from the previous week, when cable jumped to it's highest level since the beginning of 2015.
Bank of England (BoE) Monetary Policy Committee member Martin Weale commented over the weekend that he expected a rise in rates much sooner than expected.
The BoE released its Inflation Report on Thursday, in which officials slashed their outlook for near-term inflation due to the recent slump in commodity prices, but upwardly revised the medium-term inflation predictions. More importantly, the central bank said inflation will overshoot if there is no rate hike by the third quarter of 2016.
"The most likely next move in monetary policy is an increase in interest rates," the report said.
GBP/USD jumped to $1.5439 earlier on Monday, it's highest since January 2. Ahead of the European open, sterling was seen 0.30% higher at $1.5425.
"The bottom line is that with growth support re-emerging, we see sterling as a G10 outperformer along with the US dollar," BNP Paribas wrote in a note on Monday.
Sterling is likely to be sensitive to the upcoming data due to the Inflation Report. January CPI numbers are expected to show further weakness in the headline number to 0.3% from 0.5%. Upbeat figures are expected to come from the jobs front later in the week.
Technical analysis
As sterling breaks above the previous resistance of $1.5350, this level should now work as a support zone for another swing of a higher low.
As long as prices stay above $1.52, buying the dips toward $1.55 should work fine for now, as the direction is established.
But the preferred long-term trading strategy is to go short when sterling reaches the $1.55 level, with a stop loss above it and a profit target at the previous resistance of $1.5250. Before initiating a short, it would be good to see some kind of parabolic price action and sharp up momentum. We want to see spikes.
All of the most important price action was happening around the level of $1.5200 over/under during the last six weeks and despite the short-term uptrend, this area should not be forgotten, keeping in mind that this zone works as a guide.
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Sterling Nudges Higher Ahead of UK CPI
Sterling turned higher but remained below $1.54 on Tuesday, retreating from it's highest level so far in 2015 seen in the previous session.
Bank of England (BoE) Monetary Policy Committee member Martin Weale warned over the weekend that a rise in rates might come much sooner than expected.
However, market expectations irrespective of what MPC officials say, are mostly based on the current low levels of inflation. Today's UK CPI figures are unlikely to change the market stance.
Prices in UK are expected to remain on a downward path, with January CPI data set to hit a record low of a 0.4% increase on a yearly basis, while the index is expected to decline 0.8% from the previous month. In contrary, core prices are expected to slightly increase from the previous reading.
A sharper decline of 11.9% is expected for factory gate input prices.
"It is for this reason that markets expect interest rates to remain low, and given previous experience with respect to the lag effects of falling oil prices, it seems likely that prices could well continue to fall well into the middle of this year, and provide welcome relief to hard pressed consumers after five years of inflation rising above average incomes," Michael Hewson from CMC Markets wrote on Tuesday.
The cable reversed the decline seen overnight and rose 0.12% to $1.5376. GBP/USD retreated in the previous session and left it's 2015 high of $1.5439 behind.
"Beyond this potential soft spot for the GBP, the prospects for the week remain very strong. We expect Wednesday’s employment report to signal 3m/3m job creation of 125,000 and a decline of the unemployment rate to 5.7% and also forecast a large upside surprise to Thursday’s retail sales," BNP Paribas added in a trading note on Tuesday.
Technical analysis
As sterling breaks above the previous resistance of $1.5350, this level should now work as a support zone for another swing of a higher low.
As long as prices stay above $1.52, buying the dips toward $1.55 should work fine for now, as the direction is established.
But the preferred long-term trading strategy is to go short when sterling reaches the $1.55 level, with a stop loss above it and a profit target at the previous resistance of $1.5250. Before initiating a short, it would be good to see some kind of parabolic price action and sharp up momentum. We want to see spikes.
All of the most important price action was happening around the level of $1.5200 over/under during the last six weeks and despite the short-term uptrend, this area should not be forgotten, keeping in mind that this zone works as a guide.
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Falling Oil Prices Push Inflation to Lowest in Over 25 Years
The UK's CPI decelerated further away from the Bank of England's (BoE) target in January with a rate of 0.3%, the lowest since 1989, figures from the Office for National Statistics (ONS) showed on Tuesday.
ONS analysts also noted that if you were comparing January's rate to unofficial figures – before the model series of measuring inflation we have today – the figure has not been lower since March 1960 when it was at a rate of -0.6%.
In the year to January, food prices fell by 2.8% and prices of motor fuels fell by 16.2%. According to data released on Tuesday, falls in the prices of food and non alcoholic beverages, transport, and fuel has never been lower. Petrol was in January at its lowest price since November 2009 and diesel since February 2010. Some of the most notable downward contribution in food and drink prices were for milk, some fruits and beer.
Month on month the CPI fell by 0.9%, the largest monthly fall since January 2001. The core CPI, which excludes the volatile prices of food, energy, alcohol and tobacco, accelerated in line with expectations to 1.4%.
The BoE's February forecast showed CPI inflation falling temporarily below zero in spring and remaining around this level for the rest of the year. It then bounces back up around the turn of the year, as the effects of cheap energy prices drop out of the annual rate comparison.
In his open letter to UK Chancellor George Osborne BoE Governor Mark Carney said the most important single reason for below target inflation over the past year was the: “unexpected recent sharp drop in energy prices”.
Wholesale gas prices have dropped, major utility companies have announced cuts in the retail price of gas supplied to households, he added in the letter.
Carney said: “The MPC now judges it more likely than not that headline CPI inflation will turn negative at some point in the spring and will remain subdued for much of the rest of the year….Attempting to return inflation to 2% within the coming year might require relatively sharp changes in the stance of policy and would risk unnecessary volatility in output.”
House price inflation slows across UK
In a separate report, the ONS said that house prices increased by 9.8% in the year to December 2014, down from 9.9% in the year to November. The survey also showed house prices rose by 10.2% in England, 4.0% in Wales, 5.5% in Scotland and 4.9% in Northern Ireland.
Property prices in London remained the highest rising 13.3%. Excluding London and the South East, UK house prices increased by 7.4% in the 12 months to December.
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Sterling Trades Flat Ahead of BoE Minutes, Jobs Data
The pound was unable to return anywhere near the $1.54 threshold following weak UK inflation figures in the previous session. All eyes are now on the Bank of England's (BoE) meeting minutes and jobs data to set the further direction.
Sterling fell from above $1.54 mark to a daily low of $1.5310 in the previous session, while ahead of Wednesday's data cable was virtually flat at $1.5355.
UK CPI figures showed the lowest imprint since 1989, which was primarily due to cheap oil. In January, crude oil was selling at an average of $44.4 a barrel, which was down from $59.5 a barrel in December. This comparison shows a rather sharp decline over the month and indicates further downward pressure on fuel prices in January.
The latest average earnings data for the three months to December is expected to remain unchanged at 1.7%, although a slightly higher reading wouldn't be a big surprise. The latest unemployment data is expected to remain unchanged at 5.8%, while the latest jobless claims data for January is expected to show yet another decline of 25,000.
"The latest Bank of England minutes are expected to be instructive in the context of the reversal of the votes of Martin Weale and Ian McCafferty to come back into line with the mainstream and keep rates on hold after five months of voting for a 0.25% increase," Michael Hewson wrote on Wednesday.
Bank of England Governor Mark Carney said previously that the bank expects headline inflation to remain low for some time to come, while Martin Weale reiterated at the weekend that rates could rise sooner than expected.
Technical analysis
As sterling breaks above the previous resistance of $1.5350, this level is now working as a support zone for another swing of a higher low.
An up trend line connecting the previous swing lows, now lying at $1.5350, is also very positive for a bullish scenario.
As long as prices stay above $1.52, buying the dips toward $1.55 should work fine for now, as the direction is established.
But the preferred long-term trading strategy is to go short when sterling reaches the $1.55 level, with a stop loss above it and a profit target at the previous resistance of $1.5250. Before initiating a short, it would be good to see some kind of parabolic price action and sharp up momentum. We want to see spikes.
All of the most important price action was happening around the level of $1.5200 over/under during the last six weeks and despite the short-term uptrend, this area should not be forgotten, keeping in mind that this zone works as a guide.
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GBP/USD re-approaches more than 1-month highs on U.K. data
The pound rose against the U.S. dollar on Wednesday, re-approaching a more than one-month high as it was boosted by upbeat U.K. employment data, while demand for the greenback remained broadly weaker.
GBP/USD hit 1.5426 during European morning trade, the session high; the pair subsequently consolidated at 1.5426, gaining 0.49%.
Cable was likely to find support at 1.5313, Tuesday's low and resistance at 1.5586, the high of January 2.
In a report, the U.K. Office for National Statistics said that the unemployment rate fell to a six-year low 5.7% in the three months to December from 5.8% in the preceding three month-period and better than expectations for a reading of 5.8%.
The report also showed that the claimant count fell by 38,600 last month, compared to expectations for a decline of 25,000.
December’s figure was revised to a drop of 35,800 people from a previously reported decline of 29,700.
Data also showed that the U.K. average earnings index, including bonuses, rose 2.1% in the three months to December, above forecasts for 1.7% and after increasing by 1.8% in the three months to November.
Excluding bonuses, wages rose by 1.7% in the three months to December, below expectations for a gain of 1.8% and following a 1.8% increase in the three months to November.
Separately, the minutes of the Bank of England's February policy meeting showed that members voted unanimously to keep the asset puschase facility program on hold.
Members also voted unanimously to keep interest rates unchanged at a record-low 0.5%.
Meanwhile, the dollar remained under pressure after the Federal Reserve Bank of New York said on Tuesday that its general business conditions index decreased to 7.8 this month from a reading of 10.0 in January. Analysts had expected the index to dip to 8.5 in February.
Separately, the National Association of Home Builders said its Housing Market Index decreased to a four-month low of 55.0 this month from 57.0 in January. Analysts expected the index to rise to 58.0 in February.
Sterling was higher against the euro, with EUR/GBP retreating 0.63% to 0.7385.
Later in the day, the U.S. was to release data on producer prices, housing starts, building permits and industrial production. In addition, the Federal Reserve was to publish the minutes of its January meeting.
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GBP/USD holds steady close to more than 1-month highs
The pound held steady close to more than one-month highs against the U.S. dollar on Thursday, as the greenback remained under pressure after the minutes of the Federal Reserve's latest policy meeting imdicated that interest rates could stay on hold for a longer period.
GBP/USD hit 1.5466 during European morning trade, the session high; the pair subsequently consolidated at 1.5448.
Cable was likely to find support at 1.5339, Wednesday's low and resistance at 1.5586, the high of January 2.
Sentiment on the dollar remained vulnerable after the minutes of the Fed's January meeting showed that policymakers expressed concern that raising interest rates too soon could dampen the U.S. economic recovery.
The pound had strengthened on Wednesday after data showed that the U.K. unemployment rate fell to a six-year low 5.7% in the three months to December from 5.8% in the preceding three month-period and better than expectations for a reading of 5.8%.
The report also showed that the claimant count fell by 38,600 last month, compared to expectations for a decline of 25,000.
Meanwhile, investors continued to focus on developments in Greece, as Athens was expected to submit a request for an extension of its existing loan agreement with the euro zone, which differentiates from its bailout, later Thursday.
Sterling was flat against the euro, with EUR/GBP at 0.7383.
Later in the day, the U.K. was to release data on industrial orders. The U.S. was to publish a report on manufacturing activity in the Philadelphia region and the weekly government figures on initial jobless claims.
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