GBPUSD news - page 54
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GBP/USD: Cable Jumps as Labor Market Continues to Improve
The unemployment rate in the UK stayed at 5.5% as analysts had predicted, while jobless claims came out at -6,500, missing expectations of a -13,800 print. Average weekly earnings improved to 2.7% from 2.3% previously, rising at the fastest pace since July 2011.
Cable was volatile after the release and jumped around 60 pips to change hands at $1.5710, 0.4% higher on the day.
Furthermore, the Bank of England Minutes revealed that all 9 Monetary Policy Committee members voted in favor of the rate staying at the current level of 0.5%, while policymakers were also unanimous on the amount of QE remaining at £375 billion.
Core UK CPI for May improved from 0.8% to 0.9% on a yearly basis, while CPI for May also accelerated to 0.1% from -0.1% in April. The month-on-month figure came out at 0.2%, unchanged from April, the Office for National Statistics advised on Tuesday.
The main focus today will be on the Federal Open Market Committee meeting, which concludes later during the US session. Fresh economic projections will be presented, along with the rate outlook for the next months, the so-called dot plot.
The federal funds rate is expected to remain unchanged, with traders anticipating liftoff to start at September's meeting, although, the Fed should confirm this view in its monetary policy statement.
Fed Chair Janet Yellen's presser after the announcement will be of major interest for her language on future guidance.
"Despite a reduction in 2015 GDP, we do not believe the median 2015 fed funds dot will change. As of March, it stood at 0.625%, indicating policymakers expect two rate hikes before year end. Note the target range on fed funds is 0 to 25 bps so 0.125% is the starting point for liftoff. The 2015 median dot will stay at 0.625% for two reasons: One, it would take 6 of the 7 participants who are currently projecting 0.625% to lower their forecast - this is a lot. Two, the Fed doesn’t want to lose flexibility in terms of the timing of the initial rate increase, " Joseph LaVorgna, chief US economist at Deutsche Bank, wrote on Wednesday.
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GBP/USD: Cable Gains to 1-Month High Before Fed
The UK pound galloped to the highest level since May 15 on Wednesday, boosted by the nation's recovering labor market, while participants turn their attention to the Federal Reserve's monetary policy statement along with a speech from the central bank's Chair Janet Yellen.
Cable rose 0.56% to $1.5730, retreating somewhat from its earlier jump to a one-month high at $1.5755.
The unemployment rate in the UK stayed at 5.5% as analysts had predicted, while jobless claims came out at -6,500, missing expectations of a -13,800 print. Average weekly earnings improved to 2.7% from 2.3% previously, rising at the fastest pace since July 2011.
Furthermore, the Bank of England Minutes revealed that all 9 Monetary Policy Committee members voted in favor of the rate staying at the current level of 0.5%, while policymakers were also unanimous on the amount of QE remaining at £375 billion.
Core UK CPI for May improved from 0.8% to 0.9% on a yearly basis, while CPI for May also accelerated to 0.1% from -0.1% in April. The month-on-month figure came out at 0.2%, unchanged from April, the Office for National Statistics advised on Tuesday.
The main focus today will be on the Federal Open Market Committee meeting, which concludes later during the US session. Fresh economic projections will be presented, along with the rate outlook for the next months, the so-called dot plot.
The federal funds rate is expected to remain unchanged, with traders anticipating lift-off to start at September's meeting, although the Fed should confirm this view in its monetary policy statement.
Fed Chair Janet Yellen's presser after the announcement will be of major interest for her language on future guidance.
"Despite a reduction in 2015 GDP, we do not believe the median 2015 fed funds dot will change. As of March, it stood at 0.625%, indicating policymakers expect two rate hikes before year end. Note the target range on fed funds is 0 to 25 bps so 0.125% is the starting point for liftoff. The 2015 median dot will stay at 0.625% for two reasons: One, it would take 6 of the 7 participants who are currently projecting 0.625% to lower their forecast - this is a lot. Two, the Fed doesn’t want to lose flexibility in terms of the timing of the initial rate incrase, " Joseph LaVorgna, chief US economist at Deutsche Bank, wrote on Wednesday.
GBP/USD: Sterling Loses Steam, Declines Toward $1.58
Upbeat UK jobs data boosted the pound to its highest since November 2014, while a soft dollar also contributed to the upside moves on the cable. Traders are keeping the focus on the UK schedule in the session ahead, which includes retail sales figures for May.
In the previous session, the UK economy saw a positive sign after the latest wages data showed that salaries rose by 2.7% in the three months to April, the biggest monthly rise in over four years. The UK's jobless rate remained at its lowest level since 2008 in April at 5.5%.
For today's retails sales, markets expect the May figures to weaken compared to one month ago. Growth of -0.1% is expected when measured month-on-month, while 4.6% is expected on an annual basis.
Sterling jumped to $1.5850 in the previous session, its highest since early November 2014. Ahead of the European session, the GBP/USD consolidated on the downside, trading somewhat lower, down 0.06% to $1.5820.
Recent upbeat UK data adds to speculation about the timing of a possible rise in UK rates, given that in the latest Bank of England minutes two policymakers stated that keeping the status quo of "no change" was a finely balanced decision.
Michael Hewson from CMC Markets elaborates on this idea further, "If sustained at the current level (UK jobs data) in subsequent months then we can expect the divisions we saw last year on the MPC start to reassert themselves, as Weale and McCafferty start to vote for rate increases again, particularly if the rise in rates translates into increased consumer spending."
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U.K. retail sales rise 0.2% in May, pound spikes to 7-month high
Retail sales in the U.K. rose in line with expectations in May, underlining optimism over the country’s economic outlook and supporting the case for higher interest rates, official data showed on Thursday.
In a report, the U.K. Office for National Statistics said retail sales increased by a seasonally adjusted 0.2% last month, in line with forecasts. Retail sales in April rose by 0.9%, whose figure was revised from a previously reported gain of 1.2%.
Year-on-year, retail sales increased at an annualized rate of 4.6% in May, below expectations for a 4.8% gain, after rising at a rate of 4.6% in April.
Core retail sales, which exclude automobile sales, increased by a seasonally adjusted 0.2% last month, compared to forecasts for a 0.1% rise, after gaining 0.8% in March.
GBP/USD was trading at 1.5921 from around 1.5898 ahead of the release of the data, while EUR/GBP was at 0.7167 from 0.7176 earlier.
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UK Sees Lowest May Net Borrowing Since 2007
Fiscal consolidation policies and increased tax receipts continued to help the Treasury coffers in May as the net borrowing excluding public sector banks came in at £10.1 billion, down £2.2 billion from the same month a year ago and the lowest borrowing for the month of May in eight years, the Office for National Statistics (ONS) informed on Friday.
Despite concerns about softer growth not generating enough tax receipts, May's public finances got a healthy boost from increased VAT and income tax, rising 5.6% and 5.3% respectively.
Fines imposed on Barclays for rigging foreign exchange business in London helped to reduce the central government net borrowing by as much as £284 million in May.
The ONS also said in the financial year ending 2015 the PSNB was revised up to £89.2 billion, as opposed to April's reported £87.7 billion. This is now only one billion lower than the Office for Budget Responsibility's expectation of borrowing for the previous fiscal year.
Friday's release also showed that at the end of May, public sector net debt excluding public sector banks was £1.5 trillion, equivalent to 80.8% of total GDP, an increase by £83.2 billion from May last year.
"Really pleasing news for Chancellor George Osborne ahead of his 8 July budget as the public finances saw further appreciable year-on-year improvement in May, thereby extending the positive start to fiscal year 2015/16," Howard Archer from IHS Economics commented on public finances development on Friday.
The UK Chancellor George Osborne announced he would present a so-called 'Summer Budget' on July 8. The previous budget announcement held in March this year was prepared with the Liberal Democrats having their say in the Tory-led government. This time, the chancellor plans to hold the third budget announcement due to the outright victory of the Conservatives in the May election.
Osborne's updated fiscal consolidation plans will most likely echo the Conservative Manifesto published ahead of the May election. In it, Osborne pledged a further £30 billion in spending cuts over the next two years. This will include £13 billion cuts in departmental spending and £12 billion savings from welfare. The Treasury also plans to raise at least £5 billion from tackling tax evasion, and aggressive tax avoidance.
Economists have been questioning Osborne's excessive fiscal plans. Archer said "major questions remain over the new Conservative government’s ability to meet its ambitious fiscal targets over the longer term."
"This is especially true as the government is yet to clarify where the planned cuts to departmental spending and welfare spending will be made. IHS has significant doubts that the Conservatives will be able to achieve these cuts, and we suspect that the government will ultimately face either having to increase revenues (i.e. raise taxes, despite its election pledge not to increase income tax, value-added tax, or national insurance) or accept slippage in its fiscal targets," Archer wrote in his preview last Friday.
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Pound Beats World as Upbeat Britain Contrasts With Euro Gloom
No major currency outperformed Britain’s pound this week and analysts at the world’s biggest foreign-exchange trader see scope for further gains, at least versus the euro.
With negotiations between Greece and European officials crumbling and the indebted nation’s future in the euro hanging in the balance, the allure of the relatively stable sterling has come to the fore. Data pointing to an economic recovery firming up in the U.K. and the Bank of England’s moves toward raising interest rates are adding to the pound’s strength.
“Sterling offers a good alternative to the euro,” said Josh O’Byrne, a foreign-exchange strategist at Citigroup Inc. in London, ranked as the largest currency dealer in an annual Euromoney Institutional Investor Plc poll. “Sterling fixed-income is comparatively a favorite option for European investors.”
The pound appreciated 1.3 percent this week to 71.45 pence per euro at 5:47 p.m. London time on Friday and reached 71.26 pence, its strongest level since May 28. Sterling rose a second week versus the dollar, climbing 2 percent to $1.5872. It reached $1.5930 on Thursday, the highest level since November.
O’Byrne said the pound will strengthen through 70 pence per euro in the next six months.
BOE Repricing
Sterling strengthened 4.8 percent in the past three months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Its 1.8 percent surge this week also surpassed all peers.
The U.K. currency was driven higher as traders brought forward bets on the timing of the Bank of England tightening monetary policy. That was inspired by data this week showing the fastest increase in Britons’ wages since 2011 and the BOE saying factors holding back the economy were fading.
While few economic reports are due next week, Greek negotiations will continue, starting with an emergency summit of government leaders in Brussels on June 22.
“The ongoing Greek-EMU turmoil” is sterling’s strongest driver at present, “with safe-haven inflows likely to persist into July,” analysts at Credit Agricole SA’s corporate and investment-banking unit, including London-based head of Group-of-10 currency research, Valentin Marinov, wrote in a note to clients. “In the week ahead it should be reasonably plain sailing” for the pound, they wrote.
U.K. government bonds fell in the week, pushing the 10-year yield two basis points higher to 2.01 percent at the Friday close. That’s 125 basis points more than yields on similar-maturity German bunds. The 5 percent gilt maturing in March 2025 declined 0.215, or 2.15 pounds per 1,000-pound face amount, to 126.305.
GBP/USD weekly outlook: June 22 - 26
The pound ended the week close to eight-month peaks against the dollar on Friday as investors pushed back expectations for higher U.S. interest rates and concerns over the Greek debt crisis boosted safe haven demand for sterling.
GBP/USD was last at 1.5887 late Friday, holding just below the previous session’s highs of 1.5929, the most since November 12. The pair ended the week up 2.07%.
The greenback came under pressure after the Federal Reserve lowered both its U.S. growth forecast and its interest-rate projections on Wednesday, prompting investors to push back expectations on the timing of an initial rate hike.
Fed Chair Janet Yellen said the central bank wanted to see “more decisive evidence” of sustained growth before raising rates, but acknowledged that the economy has “expanded moderately” after a weak first quarter.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell to a five-week low of 93.30 on Thursday, before recovering to end at 94.32 by late Friday.
The index still ended the week down 1.02%, the third straight weekly decline.
Demand for the pound was also boosted as a deadlock between Athens and its international lenders continued ahead of the approaching deadline for Greece’s repayments to the International Monetary Fund at the end of the month.
A default by Greece could lead to the country’s exit from the euro zone.
Europe wants Greece to make spending cuts in order to secure a deal that will unlock €7.2 billion in bailout funds and prevent Athens defaulting on its debts when its bailout expires at the end of the month.
On Friday the European Central Bank extended extra emergency liquidity to Greek lenders as outflows from banks continued.
In the U.K., data on Friday showed that the budget deficit fell to a smaller than forecast £10.1 billion in May from £12.4 billion a year earlier, as income tax revenue climbed.
Sterling hit one-month highs against the euro on Friday, with EUR/GBP falling to 0.7126, before pulling back to 0.7148 in late trade.
In the week ahead, euro zone ministers are to hold talks in Brussels on Monday to discuss the crisis in Greece.
The euro zone is to release data on private sector growth on Tuesday, while the week will also bring what will be closely watched reports on the U.S. factory and housing sectors.
GBP/USD slips lower but sticks close to 7-month peak
The pound slipped lower against its U.S. counterpart on Monday, but remained withing close distance of a seven-month peak as demand for the greenback broadly weakened as expectations for an upcoming U.S. rate hike subsided.
GBP/USD hit 1.5848 during European morning trade, the session low; the pair subsequently consolidated at 1.5870, edging down 0.10%.
Cable was likely to find support at 1.5622, the low of June 17 and resistance at 1.5930, the high of June 18 and a seven-month high.
The greenback remained under pressure after the Federal Reserve's rate statement last week tempered expectations for a rate hike later this year.
The Fed lowered both its U.S. growth forecast and its interest-rate projections, prompting investors to push back expectations on the timing of an initial rate hike.
Fed Chair Janet Yellen said the central bank wanted to see "more decisive evidence" of sustained growth before raising rates, but acknowledged that the economy has "expanded moderately" after a weak first quarter.
The pound had found some additional support on Friday afterdata showed that that U.K. public sector net borrowing hit £9.35 billion last month, up from a revised £5.46 billion in April. Analysts had expected public sector net borrowing to climb to £10.05 billion in May.
Sterling was steady against the euro, with EUR/GBP at 0.7147.
Sentiment on the single currency remained fragile after Greece submitted a new package of economic reforms on Sunday night, indicating that it is prepared to make concessions to break a deadlock in order to unlock €7.2 billion in funds.
Greece’s existing bailout is set to expire at the end of this month, when it must also repay €1.6 billion to the International Monetary Fund. A default by Greece could trigger the country’s exit from the euro zone.
Greek Prime Minister Alexis Tsipras was to hold talks with representatives from the IMF, the European Central Bank and the eurogroup of finance ministers later in the day, ahead of an emergency summit by European Union leaders.
If no deal is reached Greece could need to impose capital controls on Tuesday to stem a mounting crisis in the banking sector after bank withdrawals surpassed a billion euros a day late last week.
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Bank of England's Cunliffe: Getting close to using spare labor capacity
Comments from the BOE's Cunliffe:
The question about the UK and US is: Who will get to 1.00% rates first. The Fed will hike first but the BOE is at 0.50% already. Markets are starting to believe Carney will get there ahead of Yellen.
In any case, cable if finally off the boil today after rising in 9 of 10 sessions.
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Pound moves lower against stronger dollar
The pound was lower against the U.S. dollar on Tuesday, as uncertainty over the outcome of Greek debt negotiations continued to weigh on market sentiment, sending the safe-haven greenback broadly higher.
GBP/USD hit 1.5764 during European morning trade, the pair's lowest since June 17; the pair subsequently consolidated at 1.5807, edging down 0.11%.
Cable was likely to find support at 1.5622, the low of June 17 and resistance at 1.5930, the high of June 18 and a seven-month high.
The safe-haven greenback remained supported after euro zone finance ministers failed to reach agreement over Greece’s bailout at an emergency meeting on Monday, but indicated that a final deal could be made later this week.
Eurogroup head Jeroen Dijsselbloem said new reform proposals from the Greek government were “broad and comprehensive,” and a good basis to restart stalled negotiations.
The U.S. dollar was also boosted after industry data on Monday showed that U.S. existing home sales increased 5.1% to 5.35 million units last month from 5.09 million in April. Analysts had expected existing home sales to rise 4.4% to 5.26 million units in May.
Investors were eyeing a report on U.S. durable goods orders due later in the day, for further indications on the strength of the economy.
Sterling was higher against the euro, with EUR/GBP declining 0.74% to 0.7114.
The single currency shrugged off data on Tuesday showing that private sector activity in the euro area expanded at the fastest pace in four years this month, cementing the view that the economic recovery is gaining traction.
The preliminary reading of the Markit composite purchasing managers' index, which looks at both the manufacturing and service sectors, rose to 54.1 from a final reading of 53.6 in May. It was the highest level since May 2011 and above forecasts for a reading of 53.5.
The bloc’s manufacturing PMI rose to 52.5 this month from 52.2 in May, while the services PMI improved to 54.4 this month from 53.8.
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