GBPUSD news - page 60
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GBP/USD trims gains after U.K. data, eyes on BoE statement
The pound trimmed gains against the U.S. dollar on Thursday, even after data showed that U.K. manufacturing production rose in line with expectations in June, as markets eyed the Bank of England's upcoming policy statement due later in the day.
GBP/USD pulled away from 1.5637, the session high, to hit 1.5602 during European morning trade, still up just 0.01%.
Cable was likely to find support at 1.5523, Wednesday's low and resistance at 1.5678, the high of July 31.
The U.K. Office for National Statistics reported on Thursday that manufacturing production increased by 0.2% in June, matching expectations and following a decline of 0.6% in May.
On an annualized basis, manufacturing production rose at rate of 0.5%, beating estimates for a gain of 0.4%, after rising at a rate of 1.0% in May.
The report also showed that U.K. industrial production fell by 0.4% in June, disappointing expectations for a gain of 0.1%, after increasing 0.3% in the preceding month.
Later Thursday, the BoE was expected to leave its benchmark interest rate on hold at 0.50% and its asset purchase facility program at £375 billion.
Meanwhile, the dollar remained under pressure after payroll processing firm ADP reported on Thursday that U.S. non-farm private employment rose 185,000 last month, below expectations for an increase of 215,000.
Investors were eyeing the upcoming U.S. nonfarm payrolls report due on Friday, which could reinforce expectations for higher interest rates by the Federal Reserve.
Sterling was fractionally higher against the euro, with EUR/GBP easing 0.09% to 0.6984.
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BOE MPC leaves interest rates on hold at 0.50%
Details of the Bank of England MPC August 2015 monetary policy announcement
Details from the minutes
One vote for hikes has disappointed the market and first impressions sound dovish on the talk on inflation. GBPUSD sinks to 1.5513 from 1.5620
Bank of England signals early 2016 hike after sterling climb
The Bank of England pointed to a possible rise in interest rates early next year after just one of its top policymakers backed an immediate move, as it forecast that the strength of sterling meant inflation would only pick up slowly.
The pound fell sharply and investors briefly pushed back their bets on a first rate hike until June next year, before BoE Governor Mark Carney said the Bank was getting closer to beginning to undo its stimulus for Britain's economy.
"The likely timing of the first Bank Rate increase is drawing closer," he told reporters.
"However the exact timing of the first move cannot be predicted in advance ... in short, it will be data-dependent," he said after the BoE for the first time published its quarterly economic forecasts and details of its latest policy discussions on the same day.
The BoE slashed interest rates to 0.5 percent in the depths of the financial crisis in 2009 and has kept them there since.
With the economy now recovering strongly and wages finally rising more quickly, speculation is growing about when it might start to wean Britain off low rates, mirroring the debate at the U.S. Federal Reserve.
Carney warned investors not to be too relaxed about the path, or 'curve', that they are predicting for rates.
He pointed out that the Bank was forecasting that inflation would start to overshoot its 2 percent target in just over two years' time, based on predictions in the market for a first BoE rate hike in the second quarter of next year.
"The market curve does not deliver a sustainable return of inflation to target, because there is an overshoot," he said.
After Carney's comments, several economists continued to predict a rate hike in the first three months of 2016 and the already small chance of a move this year appeared quashed.
VOTE SURPRISE
Investors were taken by surprise earlier on Thursday when the Bank said just one of its nine policymakers -- Ian McCafferty -- had voted for a rate hike at their August meeting, which ended on Wednesday.
Most economists in a Reuters poll had expected two or even three members of the Monetary Policy Committee to vote for a rate hike. The 8-1 result prompted markets to push out their bets on a first rate hike into mid-2016.
McCafferty, a non-staff member of the MPC, backed rate hikes last year along with his colleague Martin Weale. They both rejoined the fold in January as oil prices tumbled.
As Carney spoke on Thursday, bets on a June 2016 rate hike were reined in. Jason Simpson, a Societe Generale rate strategist, said: "The message is clear: rates need to rise. Not yet, but they need to go up and every inflation report is one step closer to that."
Few economists think the BoE is likely to move before the Federal Reserve, which is expected to raise rates this year, in large part because it would further push up the value of sterling. On Wednesday the pound hit its highest level against a basket of currencies in more than seven years.
Three weeks ago, Carney said the decision when to hike interest rates would likely come into "sharper relief" around the end of the year. He emphasised on Thursday that this was his own view and that it had not changed since.
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June 2015 UK trade balance -9.184bn vs -9.30bn exp
Details of the June 2015 UK trade balance data report 7 August 2015
We also got Q2 numbers from the ONS with the total trade balance at -4.812bn vs -7.496bn in Q1. The smallest deficit since Q2 2011
Q2 goods trade balance was -27.440bn vs -30.419bn in Q1. Smallest since Q2 2013
Not that any of it means a jot to the pound right now, but the better than expected numbers are likely to add some upside to the next GDP revision
GBP/USD Forecast to Decline to 1.51
The pound to dollar exchange rate is presently at fair value but will fall in the next few months says an updated currency note from Danske Bank.
Going forward, the central driver for the GBP/USD will be the difference in interest rate yields between the United States and the UK confirm Danske Bank in a just-released note to clients.
As such, projections for the exchange rate will rely on forecasts on interest rates.
The central role played by interest rates in global FX was put firmly in the spotlight on Thursday the 7th when the Bank of England undercut the pound sterling by denying a 2014 interest rate rise was likely.
In the wake of the disappointment the GBP weakened 0.7% versus EUR and 0.85% versus USD.
According to Danske Bank’s short term financial models, pricing action in the FX market seems fair given the decline in UK yields.
“Relative rates are also expected to be an important driver for GBP/USD in H2. Based on our interest rate forecasts, where we expect the Fed to hike in September, the repricing of 2Y US interest rates is expected to much larger relative to the 2Y segment in UK,” says Danske Bank’s Mikael Olai Milhøj.
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Forex - GBP/USD weekly outlook: August 10 - 14
The pound ended slightly lower against the dollar on Friday after a solid U.S. jobs report for July reinforced expectations for higher interest rates.
GBP/USD was off 0.15% at 1.5487 in late trade, after falling to two-week lows of 1.5424 earlier.
The Labor Department reported that the U.S. economy added 215,000 jobs last month, slightly lower than forecasts for an increase of 223,000, but still consistent with strong employment growth.
The unemployment rate remained unchanged at 5.3%, in line with expectations.
Hourly earnings, a component of the jobs report that the Federal Reserve has said must rise, ticked up 0.2%, also matching forecasts after stalling in the previous month.
The data was seen as underlining expectations for a near-term rate hike.
In the past three months the dollar has been boosted by investor expectations that the Federal Reserve will raise short term interest rates in the coming months, possibly as early as September.
Sterling remained on the back foot after Thursday’s minutes of the Bank of England’s August meeting showed that just one monetary policy committee member voted in favor of a rate hike this month.
The minutes showed that eight members were in favor of leaving the key interest rate at a record low of 0.5%. All nine members voted to stand pat on rates in July.
Ian McCafferty was the lone dissenter, voting for a quarter percent hike in the benchmark rate.
The minutes came as a surprise to market participants, who had expected two or possibly even three members of the MPC to back a rate increase this month.
It was the first time the minutes were published at the same time as the monthly monetary policy decision.
EUR/GBP was up 0.55% to 0.7079 from 0.7040 late Thursday.
In the week ahead, investors will be looking to Thursday’s U.S. retail sales data for a further indication on the durability of the economic recovery. Speeches by Fed officials on Monday will also be in focus.
Meanwhile, the U.K. is to release its latest jobs report on Wednesday
UK average weekly earnings 3mth-year June +2.4% vs +2.8% exp
Ouch. Big miss on key data point
GBPUSD back testing support into 1.5550
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GBP: Don't Give Up On Me Baby! - BNPP
Last week’s “super Thursday” was interpreted as dovish by markets and GBP weakened accordingly, notes BNP Paribs.
"We believe that markets have overemphasised the unexpected 8-1 vote among Monetary Policy Committee members but have underestimated the hawkish tone of the Inflation Report, especially the comments from Bank of England Governor, Mark Carney," BNPP argues.
"Two key factors are important in this respect: Inflation is expected to be weaker than previously thought in the near term but it is forecast to rise above target thereafter. The curve currently prices in a 73% chance of an initial rate hike in February but the implied pace after that is too slow. Our economists forecast six hikes (of 25bp each) in 2016-17, whereas the market is pricing in just four," BNPP adds.
"We see the recent pullback in the GBP as an opportunity especially on EURGBP. We reiterate our call for this cross to fall to 0.6750," BNPP advises.
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GDP/USD holds steady in quiet trade
The pound held steady against the U.S. dollar in quiet trade on Friday, as expectations for interest rate hikes by both the Federal Reserve and the Bank of England continued to lend equal support to the two currencies.
GBP/USD hit 1.5575 during European morning trade, the session low; the pair subsequently consolidated at 1.5605.
Cable was likely to find support at 1.5532, the low of August 12 and resistance at 1.5661, the high of August 12.
The dollar found support after data on Thursday showed that U.S. jobless claims held near the lowest level since November 1973 added to expectations for a September rate hike by the Fed.
The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending August 8 rose by 5,000 to 274,000 from the previous week’s total of 269,000.
In addition, the U.S. Commerce Department said that retail sales increased by 0.6% last month, beating expectations for a gain of 0.5%, while core retail sales, which exclude automobile sales, rose by 0.4% in July, matching forecasts.
Meanwhile, expectations for a rate hike by the BoE before the end of the year also lingered, although the central bank's latest meeting showed that only one policymaker voted in favor of a rate increase this month.
Sterling was also steady against the euro, with EUR/GBP at 0.7138.
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GBP/USD forecast for the week of August 17, 2015
The GBP/USD pair bounced off of the trend line that has been so reliable recently, and as a result it shows that we are still interested in going long. The market should head towards the 1.58 level given enough time, and we look at short-term pullbacks as buying opportunities. Once we get above the 1.58 level, we feel that this market will then head towards the 1.60 level given enough time. We believe that as long as we can stay above the uptrend line, we are essentially going to be “long only.”