GBPUSD news - page 57
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UK Inflation Slides Back to Zero in June
Inflation in Britain decelerated back to 0.0% in June, down from 0.1% a month before, and in line with market estimates. Core inflation, a less volatile gauge stripped of energy and food prices, slowed to 0.8% - the slowest in six years, the Office for National Statistics (ONS) informed on Tuesday.
Significantly weak inflation allows the Bank of England (BoE) to maintain super loose monetary policy without raising concerns about building up any notable upward price pressures.
Despite inflation hovering around zero since February this year, policymakers argue the UK is safe from any marked deflationary spiral. The annual rate of CPI is seen crawling back towards its 2% target early next year, after the effects of sharply falling crude oil prices in 2014, and early this year begin to fade out. Meanwhile, the recent appreciation of sterling against the euro could be seen as an offsetting factor, dragging down on prices of imported goods and consumer prices.
Today's CPI release showed the largest downward driver on the annual rate of CPI came from falling prices of clothing and food, with prices of air fares rising at a slower pace when compared with June last year.
Commenting on the data, ONS statistician Philip Gooding said “Inflation has continued its pattern of recent months, when prices have been very little changed on the previous year. The headline rate for June has dripped very slightly on May, back to zero, thanks to small downwards effects from movements in clothing and food prices and air fares.”
BoE chief economist and member of the nine-strong Monetary Policy Committee (MPC) Andrew Haldane rejected calls for an earlier rate hike, arguing that price pressures in UK remained subdued, with domestically-generated inflation in the form of wage growth being too weak to return inflation to the 2% target within two years. Martin Weale, a more hawkish rate-setter, argued that the BoE should be ready to start raising the base interest rate as early as in August this year, as the labor market continues to tighten markedly.
Today's release of CPI data is also the last before the BoE publishes its fresh outlook for inflation on August 6, within its quarterly Inflation Report. The BoE is also introducing new communication procedures as of this coming August, when a policy announcement, MPC minutes and, in the case of the August data cycle, Inflation Report forecasts will all be announced on the same day.
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Point at which interest rates may begin to rise is moving closer says Carney
Mark Carney now moves on to the UK
A very bullish comment from Carney and the caveats have been ignored by the pound which shoots to 1.5567 from 1.5480
McCafferty comments now
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GBP/USD: Sterling Hits 2-Week High Ahead of UK Jobs Data
Sterling moved higher to touch a 2-week high from the 7-day highs from the previous session, after hawkish comments from the Bank of England helped it burst higher.
Today's UK session remains in focus with the unemployment rate and average earnings mostly eyed. Economists expect the underlying measure of weekly average earnings excluding bonuses to have picked up to 3% in the quarter to May, which would be up from a six-year high of 2.7% recorded in April.
The jobless rate is seen unchanged at 5.5% as jobless claims, a narrower and less distant gauge tracking labor market activity, is expected to have declined by only 9,000, compared to 6,500 people a month before, and significantly down from the 39,400 claimants in January this year, for instance, leaving the claimant-count rate unchanged at 2.3%.
Sterling started rising after the European open, trading 0.17% higher at $1.5660.
Technical analysis
Sterling is going through a massive rebound from the short-term bottom of $1.5330 and in the coming sessions will very likely retest the zone of resistance around $1.5700.
But for now technical oscillators are hugely overbought and at least on the short-term timeframe traders could expect correction down to the area that worked previously as resistance around $1.56.
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Bank of England's Carney: Inflation pressures will firm at end of year
Speech highlights from Bank of England Governor Carney:
Hawkish comments from Carney on Tuesday sent cable up about 200 pips on Tuesday. The speech was part of the Margna Carta Lecture Series and took place in Lincoln, UK.
Cable rose about 15 pips as the headlines hit, touching a US high of 1.5630. The high in Asia was 1.5650.
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Why The GBP Rally Against The USD Is 'Puzzling' - Credit Agicole
The latest GBP-rally reflects investors' bets on growing policy divergence between the increasingly hawkish BoE and dovish central banks like the ECB, the SNB and the BoJ.
What puzzles us is the apparent resilience of GBP against USD, despite the fact that the Fed also seems on course to hike rates even sooner than the BoE.
Investors also seem to ignore the very close economic ties between the UK and the rest of Europe. They should limit the ability of the BoE to de-couple from the ECB and, by implication, the scope for further GBP-rally against EUR.
In particular, we note that following the global financial crisis in 2008 there was a significant increase of inbound FDI as a result of which important parts of the UK industry became parts of (mainly European) vertically integrated supply chains.
As part of these supply chains, the UK is importing foreign inputs for the production of outputs that are sold predominantly domestically. This had two important implications for the currency:
1) The first is structural deterioration of UK's trade balance especially vis a vis the EU. Wide trade deficits should continue to act as a break on any GBP-rallies from here.
2) Secondly, UK imports Eurozone deflation through the lower prices of the imported European inputs. As an example of how the recent surge in European FDI into the UK is acting as a drag on UK inflation, consider the ongoing price wars between the German food retailers, who entered the UK market in recent years, and the UK incumbents. As a result of the wars measures of food and clothing inflation like the BRC shop price index remain into negative territory for a second consecutive year.
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GBP/USD forecast for the week of July 20, 2015
The GBP/USD pair broke higher during the course of the week, clearing the top of that hammer from the previous week at one point. That being the case, the market should then head to the 1.58 level, and then eventually the 1.60 handle. However, it is difficult to hang onto the trade for the long term move at the moment, so we are looking for short-term buying opportunities more than anything else. Ultimately, we believe that the British pound continues to go much higher against most currencies, but this one particular pair might be a little bit different as the US dollar of course is favored in general overall. While we think it is bullish, this is going to be a difficult trading hang onto for any real length of time, unless of course you can start out with a core position and continue to add small bits to the position going forward.
With this, it will take those of you who are very patient in order to hang onto this trade. If you have issues with volatility or waiting for returns, this will not be the trade for you. Ultimately, we believe that the 1.52 level below is supportive, and as a result it is not until we break well below there that we would even remotely consider selling this pair. While the US dollar has been so strong against most currencies, the British pound has been a little bit of an outlier, and we think that will continue to be.
Once we clear the 1.60 level though, we feel that the market will finally have the clear space it needs to start going in much more of a smooth moves. The trend is most certainly to the upside and has been for some time, but obviously there’s a lot to chew through. After all, there are a lot of things out there moving the markets at the moment, but we did just get beyond the Greek debt issue, which of course is good for “risk on” trade such as this one.
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UK Preview: Will 2015 Be 'The Lift-Off Year'?
The next week in the UK does kick off with the public finances release on Tuesday (more on this later), but market participants will sharpen their focus more on the MPC minutes due Wednesday, and retail sales figures out the following day.
Even though it is highly likely that all nine rate-setters at the Bank of England's Monetary Policy Committee voted unanimously on the policy stance for July, comments that those rate-setters have made recently suggest we should be prepared for a bit of turbulence in the coming months.
After more than six years of highly accommodative monetary policy in Britain, this year could be the one when the BoE eventually lifts off the ground level toward more normal monetary settings. At least this is what the most recent comments by the BoE top officials suggest.
Speaking before the UK Treasury Select Committee this week, BoE Governor Mark Carney said "the point at which the interest rates may begin to rise is moving closer, given the performance of the economy, consistent growth above trend, affirmative domestic costs, kind of balanced ... by disinflation that we are are importing from abroad in part due to the strength of the currency."
Later in the week, Carney became even more explicit saying that in his view, "the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year."
BoE rate-setter David Miles offered a similar view this week when he said the BoE should begin to normalize monetary policy as early as in August this year, and then maintain a slower and more gradual path toward post-crisis monetary normalization in the UK.
"I do have one more meeting on the Committee and it will coincide with the MPC’s August Inflation Report. It also comes at a time when I think the case for beginning a gradual normalisation in the stance of monetary policy is stronger than at any time since I joined the committee over 6 years ago," Miles told the audience at the Resolution Foundation on July 14.
The comments coming in from both sides of the Atlantic also suggest that BoE and the US Federal Reserve (Fed) could eventually lift off roughly simultaneously, as opposed to the timeframe expected some months ago, which suggested the Fed would hike the base rate far earlier than the BoE. As always, much will depend on the fresh macro data coming in as we move further into the year, and if inflation picks up as expected, given the volatile prices of crude oil or gas.
Strong domestic consumption to boost UK GDP
Even though still fragile, the UK economy has been growing strongly in recent years relative to a rather meager post-crisis recovery both in Europe and in the US.
Growth in Britain this year is again expected to be driven strongly by domestic consumption, partly through stronger retail sales, while inflation remains significantly weak. The UK's Office for National Statistics is releasing the June figures on Thursday next week. Economists' median estimate suggests sales volumes excluding fuel accelerated further in June by 0.3%, while total sales are seen picking up even more by 0.4% on a month-on-month basis.
According to the British Retail Consortium (BRC), UK retailers enjoyed strong sales in June as more people feel enthusiastic about shopping, while inflation remains low and real incomes rose for an eighth consecutive month.
"We saw welcome signs of growing consumer confidence, with people more willing to ‘trade-up' and spend a bit more on big-ticket purchases, likely boosted by the growth in the supply of credit and other factors such as low inflation and rising real incomes," BRC Director General Helen Dickinson commented on the June survey.
Regarding overall economic growth, the UK's National Institute of Economic and Social Research (NIESR) said in its most recent survey economic performance in Britain had improved, and spare capacity continued to be absorbed in the second quarter, with the quarterly rate of GDP estimated to have accelerated to 0.7%, up from 0.4% in the first three months of this year.
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GBP/USD weekly outlook: July 20 - 24
The pound edged lower against the dollar on Friday, pulling away from two-week highs hit earlier in the week, as upbeat U.S. economic data added to expectations for an interest rate hike this fall.
GBP/USD hit highs of 1.5676 on Wednesday, the most since July 1, before subsequently consolidating at 1.5602 by late Friday, down 0.05% for the day but 0.53% higher on the week.
Data on Friday showed that U.S. consumer prices rose 0.3% in June, the fifth consecutive monthly increase, while core prices, which exclude food and energy, increased 0.2% last month, adding to signs of firming inflation.
A separate report showed that U.S. housing starts surged 9.8% to 1.174 million units in June. Analysts had expected housing starts to increase by 6.2% last month.
U.S. building permits jumped 7.4% to 1.343 million units in June, the most since July 2007, pointing to a rapidly strengthening housing market.
Federal Reserve Chair Janet Yellen said earlier in the week that the central bank was on track to raise interest rates by the end of the year if the economy continues to grow as expected.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, inched up 0.3% to end at 98.09 late Friday, the strongest level since April 23.
For the week, the index rose 1.9%, the biggest weekly gain since May, amid growing indications that a rate hike is coming in the U.S. later this year.
Meanwhile, demand for the pound continued to be underpinned after Bank of England Governor Mark Carney said earlier in the week that the time for the bank to raise rates from record lows is moving closer.
Sterling rallied to an eight-year high against the euro (EUR/GBP) due to the diverging monetary policy stance between the Bank of England and the European Central Bank.
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GBP/USD almost unchanged on U.S., U.K. rate hike hopes
The pound was almost unchanged against the U.S. dollar on Monday, as expectations for upcoming rate hikes in the U.S. and the U.K. lent equal support to both currencies.
GBP/USD hit 1.5583 during European morning trade, the session low; the pair subsequently consolidated at 1.5588.
Cable was likely to find support at 1.5554, Friday's low and resistance at 1.5671, Friday's high.
Demand for the dollar remained supported after upbeat data on Friday fuelled further expectations for a U.S. rate hike in the near future.
Data on Friday showed that the U.S. consumer price index rose 0.3% in June, while consumer prices ticked up by 0.1% last month on a yearly basis.
A separate report showed that U.S. housing starts rose 9.8% to 1.174 million units in June, compared to expectations for an increase of 6.2%.
U.S. building permits rose 7.4% to 1.343 million units last month, confounding expectations for a 11.8% drop.
The data came after Federal Reserve Chair Janet Yellen said, in testimony before the House Financial Services committee, that the Fed is likely to raise rates "at some point this year." She added that the U.S. labor market healthier but "still some slack."
Meanwhile, the pound also remained supported after Bank of England Governor Mark Carney said last week week that the time for rate increases is moving closer.
Expectations rise for UK hikes after MPC comments
Reuters poll shows that BOE rate hike expectations are risingA good old Reuters poll just out now shows 60% of respondents see a UK rate hike coming by the end of Q1 2016, up from 55% at the last poll. The expectations for a hike in Q1 2016 remain the same
Growth estimates remain the same at 0.5-0.7% per quarter through to the end of 2016The pound will see increased risk on Wednesday when we get the July MPC minutes and votes. It's probably too early to see a change in vote but the market might get a tad excited after the recent comments from Carney
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