GBPUSD news - page 51
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UK GDP Preview: Upward Revisions Loom
The first official estimate showed the UK economy slowed to 0.3% in the first quarter, down from 0.6% in the previous three months. The first reading was based on less than 50% of the data available, however, and included only the output side of the economy. Such estimates are therefore subject to revisions, which the Office for National Statistics (ONS) says are typically around 0.1-0.2 percentage points, both ways. The majority of economists now expect an upward revision to 0.4%. The Bank of England (BoE) expects first-quarter growth of 0.5% in the final estimate.
UK economic growth has been among the strongest among the G7 nations, driven mostly by strong domestic demand and a robust services sector. Despite this steady growth, the BoE revised down its medium-term GDP projections saying it was mainly due to "a higher bank rate path, higher exchange rate ... and weaker productivity projections." Regarding the rates path, BoE Governor Mark Carney said on May 14 that "rates will go up by this time next year, but it depends on the evolution of the economy."
Revisions
Since the first estimate, the ONS has published the remaining figures except the services sector, which has the largest weight on overall GDP (78%) and its data will be published alongside the GDP release next Thursday.
The March figures for the manufacturing and construction sectors, combined with the revisions from the previous two months, should add a rounded 0.1% (0.057%) to total GDP, the ONS said. The construction sector enjoyed a stronger end to the first quarter, while industrial production rose above estimates in March and above February's slight rise after manufacturing performed better than expectations.
Much will now depend on the services and whether there are any revisions, or a rebound in March, which might help push the overall growth upward. The first estimate showed the output in this sector decelerated to 0.5% in the first quarter from 0.9% a quarter before, and was the largest drag on growth.
Rebound in business investment
The second GDP estimate will also include the first set of expenditure figures, including business investment figures. Low inflation in the UK allows for higher real income, which should in turn translate into higher spending, and a healthy boost to the overall economic performance.
This should add strength to the retail sector, which accounts for 5.6% of total GDP, and continued to rise in the first quarter by 0.9%, which the official statisticians said was the 25th consecutive month of a quarterly rise, but slower than in the fourth quarter of last year, when sales increased 2.2%. Even so, the ONS said a solid retail performance in the first quarter should contribute positively with around 0.1 percentage points to total GDP growth.
Business investments are expected to have rebounded sharply in the first quarter (1.6%), after suffering a sudden plunge a quarter before (-0.9). The BoE economists expect a notable pick-up in investments given easier credit conditions and solid business surveys. But they also warn of how weaker investment plans in the UK extraction sector "was likely to be a continued drag."
Again, a weak trade balance is expected to be among the major offsetting factors on the downside. The first-quarter deficit on trade in goods and services widened by £1.5 billion compared to the previous quarter, which the official statisticians said would be a "drag on GDP."
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GBP/USD: Sterling Edges Higher Ahead of UK Q1 GDP Revision
Traders focus returned to the UK with the latest revision to the initially disappointing Q1 GDP numbers, posted just prior to this month’s election vote.
The initial Q1 GDP number was rather unsatisfactory, coming in at 0.3%, well below expectations of 0.5%, raising concerns that the uncertainty created by the approaching election had prompted a delay in some investment decisions. Today’s revision is expected to see an upward revision to the Q1 numbers to 0.4%, as more data is added to the internals of the GDP calculation.
The cable currency pair rose slightly, by 0.16% to $1.5374.
Recent gains in sterling represents the biggest concern for the exports side, which are expected to decline by 0.2%.
"Given the strong showing seen in recent European data in Q1 this would be disappointing, so there is a chance that this estimate could well be wrong," Michael Hewson from CMC Markets UK commented on Thursday.
Furthermore, it is expected that we will see a significant increase in business investment of 1.6%, from the disappointing decline seen in Q4 of 0.9%.
UK economic growth has been among the strongest among the G7 nations, driven mostly by strong domestic demand and a robust services sector. Despite this steady growth, the BoE revised down its medium-term GDP projections saying it was mainly due to "a higher bank rate path, higher exchange rate ... and weaker productivity projections."
Later in the day, the attention will shift to the US economy with some important data to watch, including weekly jobless claims, pending home sales and oil inventories.
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GBP/USD: Sterling Subdued as UK Economic Momentum Slows
he pound turned lower versus the US dollar on Thursday, in reaction to news that the second estimate of UK Q1 GDP reading showed the UK economy slowed its pace of growth compared to the final quarter of 2014, while the reading confirmed the first estimate.
The second official estimate showed the UK economy slowed down to 0.3% in the three month period ending March, down from 0.6% seen in the previous quarter. The reading also acknowledged the first estimates, while missing analysts' projections of 0.4% growth. On an annual basis, it grew 2.4% in the reported quarter, following the 3.0% advance in the fourth quarter.
The primary downward drivers came from a weaker-than-estimated services sector, which has the largest weight on total growth and failed to pick up between February and March, rising a slight 0.1% against expectations of 0.3%. This led to a downward revision in the whole quarter services growth of 0.4%.
Right after the release, sterling turned to losses, dropping 0.07% to $1.5343 to trade down 0.20% at $1.5318 an hour after the data were made public.
Later in the day, attention will shift to the US economy with some important data to watch, including weekly jobless claims, pending home sales and oil inventories.
BoE GDP revision
UK economic growth has been driven by strong domestic demand and a robust services sector. However, the BoE revised down its medium-term GDP projections, saying the move was mainly due to "a higher bank rate path, higher exchange rate ... and weaker productivity projections."
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GBP/USD slips lower, re-approaches 3-week trough
The pound slipped lower against the U.S. dollar on Friday, re-approaching a three-week trough as demand for the greenback remained supported by expectations for an upcoming U.S. rate hike and ahead of U.S. economic growth data due later in the day.
GBP/USD hit 1.5284 during European morning trade, the session low; the pair subsequently consolidated at 1.5300, edging down 0.11%.
Cable was likely to find support at 1.5241, the low of May 8 and resistance at 1.5439, the high of May 27.
Demand for the dollar continued to be underpinned as economic data released in the past week, including reports on inflation, new home sales, business investment and consumer confidence all indicated that the U.S. economy is gaining momentum after a slowdown in the first quarter.
Market participants were looking ahead to preliminary first-quarter U.S. economic growth data due later in the day, for further indications on the strength of the economy.
Expectations that the economy will rebound have supported the view that the Federal Reserve will begin to hike interest rates around September.
The pound also remained under pressure after the U.K. Office for National Statistics said on Thursday that its second estimate of gross domestic product confirmed growth of 0.3% % in the first quarter, unchanged from the initial estimate and below expectations for a reading of 0.4%.
On a year-over-year basis, GDP expanded 2.4%, also in line with the first estimate.
Sterling was lower against the euro, with EUR/GBP rising 0.22% to 0.7164.
Earlier Friday, official data showed that German retail sales rose 1.7% last month, beating expectations for a 0.8% gain. The change in retail sales for March was revised to a 1.4% decline from a previously estimated 2.3% drop.
Separately, a preliminary report showed that Spanish consumer prices slipped 0.2% this month, compared to expectations for a 0.5% decline, after a 0.6% fall in April.
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Sterling Slips as Markets Refocus on Monetary Policy
The main story this week has been the US Dollar. A lack of significant tradable economic data out of the UK and EU has seen Sterling and Euro languish. Sterling in particular has been under pressure as the post-election glow in the unit fades. GBPUSD has declined every day this week and has now almost slipped back to pre-election levels as FX markets refocus on monetary policy.
Based on official forecasts, the Bank of England (BoE) is not expected to hike rates until 2016, meanwhile the Federal Reserve (Fed) is on track to hike rate in the back end of 2015. The prospect of relatively higher investment returns in the United States stimulates demand for the Greenback at the expense of Sterling and biases GPBUSD to the downside.
The common currency has been in defensive more this week also as the lack of data has made room in headlines for Greece, which faces the real prospect of default in the next few weeks. Greece is due to repay 1.2-billion Euros of debt between now andJune 12th and has said that it quite simply doesn’t have the cash on hand. EURUSD slid to 1-month lows this week and is now approaching the 12-year lows touched back in March as nervous sentiment persists. The soft Euro sentiment pushed GBPEUR to 2-month highs this week, with its eyes on the multi-year high at 1.4250. While this pair has pulled back somewhat as the week draws to a close, looking forward risk remains to the high-side, particularly as the prospect of interest rate hikes in the UK grow nearer.
After a quiet data calendar this past week, the coming one offers a lot more to be excited about. The week kicks off with the UK Purchasing Manager’s Index series, which gauge the relative economic health of Britain’s manufacturing, construction, and services sectors. These leading indicators, when taken collectivity, offer good insight into what can be expected for broader inflation and employment related data. The Services sector is Britain largest contributor to GDP and generally receives the most attention. Lately the results have been encouraging as they trend higher. Given recent concerns about soft inflation a strong services PMI reading will be important for Sterling’s performance next week. This is especially true versus the American Dollar where the fading glow of the election related political certainty in the UK weighs on the pair.
The headline data events next week however at the European Central Bank (ECB) monetary policy announcement and American Employment statistics. Note that the BoE will also be making a monetary policy announcement; however governor Carney has be quite transparent that no policy changes should be expected in the near term. As such currency market will likely look past the event. Similar to the BoE, the ECB is expected to remain sidelined this week also. However whereas the BoE tends not to give rate guidance at times when no policy change occurs, ECB president Mario Draghi is scheduled to give a press conference and answer journalist questions. No doubt there will be a large emphasis on the impact of QE on Eurozone inflation and how it is influencing the ECB’s monetary policy outlook. No fresh sentiment changing news is expected, however the event itself tends to stimulate excess rate volatility in the common currency. Additionally, given the near-term possibility of default, Greece debt concerns are likely to be raised also.
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UK Preview: New Surveys to Show if Economy Gets Second Breath in Q2
The second revision to the UK's first-quarter gross domestic product (GDP) failed to surprise on the upside, confirming the economy decelerated by as much as half at the start of this year to a growth of 0.3%.
A healthy rebound in business investments, steady growth in domestic consumption and modest upward revisions to both manufacturing and construction output failed to offset significantly weaker services and a wider trade deficit.
Manufacturing
Markit/CIPS' manufacturing PMI is due Monday, June 1. The April release showed business activity slipped to a seven-month low of 51.9, while the market expectations for May suggest the headline gauge picked up to 52.8.
According to the Confederation of British Industries (CBI), UK manufacturing output slipped between April and May, but strengthened on a quarterly basis as export orders improved. The CBI said exports were among the upward drivers over the quarter to May, picking up to a six-month high while the expectations for the coming quarter remain at similar levels to those seen in the previous months, slightly above the longer-term average.
In its latest monthly wrap-up of business conditions, the Bank of England (BoE) said manufacturing output growth suffered "weak euro-area demand and the appreciation of sterling against the euro have made exporting to Europe more difficult, offset by rising demand from the United States, aided by the depreciation of sterling against the dollar."
The figures from the Society of Motor Manufacturers and Traders (SMMT) showed mediocre exports dragged down on the overall car production in April, falling 3.8%, while the output overall in the first four months of this year increased 19.4% compared with the previous year.
Construction
The UK construction sector suffered notable declines in the first four months of this year, when compared with the second half of the previous year, as slowing activity in the housing market continued to weigh down on the sector.
Economists' median estimate suggests activity picked up slightly in May to 55.0, up from a 22-month low of 54.2 in April.
The housing market appears to have picked up again with both house prices and mortgage approvals rising again. The British Banking Association (BBA) said in its latest survey that "there was a significant pre-election jump in mortgage approvals which we would expect to continue in the coming months."
Services
The latest official hard data showed the services sector, the largest chunk of the economy accounting for some 78% of total GDP, decelerated sharply in the first quarter. Markit's data on the activity in this sector is due on Wednesday. Estimates ahead of the PMI services release for May point to a weaker 59.1, compared to 59.5 in April, when the activity picked up to an 8-month high, and offset volatile activity in both manufacturing and construction sectors.
This week's CBI survey showed services enjoyed a strong rebound in output in the quarter to May. "Strong confidence and activity in the services sector reinforces our view that weaker growth over the first quarter of 2015 will prove temporary," Rain Newton-Smith, CBI Director for Economics, commented on the report.
"Prospects for consumer services remain buoyant, as real incomes rise supported by low inflation and strong employment, fueling spending in bars, hotels and restaurants. But concerns about skills shortages are increasing in both sectors, particularly among business and professional services firms looking to expand," Smith added.
BoE to sit tight on policy in June
Bank of England policymakers will most likely announce on Thursday next week they will have left the monetary policy unchanged in June, as inflation remains significantly weak and is expected to remain close to zero before rising again toward the end of this year.
There has been unanimity among the nine-strong Monetary Policy Committee (MPC) since January this year, when Martin Weale and Ian McCafferty joined the majority after five months of voting for a 25 basis point rate hike.
Despite the current unanimity, the latest MPC minutes revealed the rift among policymakers continued in May, with McCafferty and Weale seeing their May decision as "finely balanced between voting to hold or raise the Bank Rate."
The May logs also showed all members expected the base rate to increase: "While there was a range of views over the most likely path for Bank Rate, all members agreed that it was more likely than not that Bank Rate would rise over the three-year forecast horizon."
A majority of economists now expect the first round of tightening to come by the end of the first half of 2016.
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GBP/USD forecast for the week of June 1, 2015
The GBP/USD pair broke down during the course of the week yet again, as we are now clearly well below the 1.55 handle. Because of this, we feel that this market is probably in a break down even farther, perhaps heading towards the 1.50 level, and then possibly the 1.45 level. Ultimately, we believe that the US dollar will probably be stronger than the British pound, and we are sellers in general. Of course, we anticipate the 1.50 level to be somewhat supportive, so this is going to be a difficult trade to hang onto for any real length of time.
For how long will it be supported when the financial transactions get shifted from London?
GBP/USD Forecast June 1-5
GBP/USD continued its sharp slide last week, losing 200 points. The pair closed at 1.5273. This week’s highlights are the PMI reports. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.
The dollar was broadly stronger last week, and had no trouble posting strong gains against the British pound. The US currency got a boost from strong core durables data out of the US and managed to weather weak GDP and employment numbers. In the UK, Second Estimate GDP came in at 0.3%, within expectations.
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UK Factory PMI Falls Short of Expectations in May
UK manufacturers have seen a volatile start to the second quarter as pre-election jitters and a stronger sterling weighed on production and exports. However, the prospects for the euro zone turning the corner suggests UK exports and production should rebound tentatively over the rest of the year.
In May, business activity in UK factories improved slightly as Markit/CIPS PMI rose to 52.0 in May, up from last month's revised seven-month low of 51.8, falling short of expectations.
"Expectations of a broad rebound in UK economic growth during the second quarter of the year are called into question by these readings," Rob Dobson, senior economist at Markit, wrote in the manufacturing activity report.
"Manufacturer’s growth funk is also hurting job creation, with increases to payroll numbers easing to a near standstill in May. However, on the price front, the news was better for those hoping deflation may prove short-lived, as manufacturers raised their selling prices for the first time in five months," Dobson further commented.
According to the Confederation of British Industries (CBI), UK manufacturing output slipped between April and May, but strengthened on a quarterly basis as export orders improved. The CBI said exports were among the upward drivers over the quarter to May, picking up to a six-month high, while the expectations for the coming quarter remain at similar levels to those seen in the previous months, slightly above the longer-term average.
In its latest monthly wrap-up of business conditions, the Bank of England (BoE) said manufacturing output growth suffered "weak euro-area demand and the appreciation of sterling against the euro have made exporting to Europe more difficult, offset by rising demand from the United States, aided by the depreciation of sterling against the dollar."
The figures from the Society of Motor Manufacturers and Traders (SMMT) showed mediocre exports dragged down on overall car production in April, falling 3.8%, while overall output in the first four months of this year increased 19.4% compared with the previous year.
The latest official data showed the manufacturing sector slowed to 0.1% in the first quarter from 0.2% the quarter before, while the overall economic performance decelerated by as much as a half to 0.3%. A healthy rebound in business investments and steady growth in domestic consumption failed to offset significantly weaker services and a wider trade deficit in the first quarter.
Market participants will now be closely watching construction and services PMI releases over the next two days.
The services PMI jumped to an eight-month high in April and offset mediocre activity in both the manufacturing and construction sectors. Markit's less distant gauge of services' activity at the start of the second quarter compares to less upbeat, and more distant, official hard data, which showed services growth in the first quarter decelerated significantly and dragged down on total GDP.
Markit's release from the previous month showed the construction sector had dived to a 22-month low, partly due to uncertainty stemming from pre-election nervousness in the UK. However, Markit senior economist Tim Moore said that "despite experiencing pre-election risk aversion among clients in April, construction companies indicated a strong degree of confidence regarding the year-ahead outlook."
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