GBPUSD news - page 68
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GBP/USD: Sterling Still Surfing on Fed Rate Hike Delay
Sterling kept its gains on Monday against the US dollar amid the continuing concerns about the timing of the Federal Reserve (Fed) rate hike, while the macro calendar offers little incentive today.
The pound was up 0.32% at $1.5355 against the greenback in the early European session.
Moreover, all eyes are now on Tuesday's CPI release in the UK, which measures the movement of the overall price level (cost of living). Markets expect it to rise 0.2% month-on-month and the same on a yearly basis, while core inflation should hit 1.1%.
"Last week's rally to 1.5380 was a welcome sign that we may have seen a short-term base for the pound. Ideally we need to see a move beyond the 1.5425 area to argue for a return to the September highs at 1.5630. Pullbacks need to stay above the 1.5220 area to reassure or we could slip back towards the lows this month at 1.5110," Michael Hewson, chief market analyst at CMC Markets, wrote on Monday.
Last week, CMC Markets analyst Jasper Lawler wrote to clients that the greenback fell due to concerns about the timing of the Fed rate hike.
"The US dollar turned down across the board on Friday as a follow-through on weakness that began on Thursday when Federal Reserve showed reluctance amongst Fed members to hike interest rates. The minutes, on top of the weak US jobs report reduce the odds of a rate hike in 2015 which had been baked into the price of the dollar, so that's coming out now," Lawler said.
Adding to the debate around the timing of the central bank's rate hike, Atlanta Fed President Dennis Lockhart confirmed that the bank should hike interest rates at either its two upcoming meetings.
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GBP/USD: Further Gains for Pound Before CPI Publication
Sterling has risen 0.24%, and is trading at $1.5344, down from a high of $1.5373 after a day of low trading volumes, mostly due to a public holiday in the US.
Demand for the dollar has also been hit by declining expectations of an interest rate hike in the US this year. Minutes from the Federal Open Market Committee meeting in September show opinion was split as to whether an imminent hike in interest rates was a desirable move. The FOMC decided against interest rate increases in September amid fears of a weakening global economy, particularly the recent fragility in China.
At an IMF meeting in Lima, Peru, Vice Chairman of the Fed Stanley Fischer said, "It has been clear from conversations at this conference that many officials of emerging markets and other countries feel sufficiently forewarned and prepared for them to want us to just do it."
Yet, Fischer also warned that the Fed would need to be "cognizant of the risks" and that any rate increase would depend critically on future developments in the economy and that an increase in rates this year is "an expectation, not a commitment".
However, there are still dissenting views with Chicago Fed President Charles Evans indicating again today that he would rather wait until next year to increase the interest rate. Evans is regarded as an inflation dove and poor performance in the September job report is unlikely to assuage fears that it is too early for a rate raise.
There is belief among a number of Fed members that increased job creation will take the slack out of the labor market, pushing wages higher and lifting inflation toward the 2% target.
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GBP: Trading the British Average Earnings Index
British Average Earnings Index, released each month, is a leading of consumer inflation. A reading which is higher than the market forecast is bullish for the pound.
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Wednesday at 8:30 GMT.
Indicator Background
The Average Earnings Index is closely watched by analysts, and as a key indicator, an unexpected reading can have a significant effect on the movement of GBP/USD.
The indicator improved in July, posting a gain of 2.9%, up from 2.4% a month earlier. This beat the estimate of 2.5%. The upward trend is expected to continue, with an estimate of 3.1%. Will the index repeat and beat the forecast?
Sentiments and levels
Despite the Fed remaining on the sidelines again last week, monetary divergence still favors the US dollar and is weighing on the pound. The UK economy is not doing badly, but investor jitters over a global slowdown and limping Eurozone could spell trouble for the pound. Thus, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.5590, 1.5485, 1.5341, 1.5269, and 1.5163.
5 Scenarios
source
Preview: UK, the Deflation Dodger
Nearly three quarters of the downward deviation from the official inflation target of 2% comes from external sources such as cheaper energy and imports. This has been partly due to stronger sterling and depreciating emerging market currencies.
Global oil prices continued to fall significantly over the year to September, with Brent crude average monthly price falling as much as 48% when compared with the same month a year ago. Petrol prices also continued to decline in September, and were some 14% lower when compared with the same month a year ago, according to the UK's AA Fuel Report.
The British Retail Consortium (BRC) reported earlier this week that the annual rate of UK shop price growth had declined deeper below zero by 1.9% in September, down from deflation of 1.4% a month before. The BRC said food prices slipped back into deflation by 0.5% in September after rising 0.2% in August, while non-food price deflation accelerated to 2.9% from 2.4%.
"September saw significant prices drops in both food and non-food goods marking the 29th consecutive month of falling shop prices. The temporary fluctuation of annual food price rises has come to an end with food returning to deflationary territory," BRC director general Helen Dickinson commented on the September figures. Aggressive price wars among the UK supermarkets add to those downward pressures.
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UK PPI input Sept mm NSA +0.6% vs +0.3% exp
Latest data now out
All eyes on the horrid CPI number
GBP/USD: Sterling Hit by Downbeat UK CPI
The UK's pound extended its previous losses after the UK headline inflation figure came in worse than expected.
The annual rate of CPI slipped back into deflationary territory by 0.1% in September from the previous 0.0% growth. Core prices remained at 1.0%, the same as last month, the Office for National Statistics reported on Tuesday.
Sterling was down 0.57% at $1.5259 after the data on Tuesday, falling from $1.5289 before the release.
Traders will also focus what Monetary Policy Committee policymaker and dissenter Ian McCafferty has to say, "with respect to his reasons for looking to push rates higher despite the weaker than expected data seen so far in Q3 across all UK sectors with respect to the PMI data seen earlier this month," Michael Hewson from CMC Markets wrote on Tuesday.
On sterling, BoE policymakers argued that the pound's substantial appreciation since mid-2013 continued "to depress import price growth and so CPI inflation. The speed and extent of pass-through of changes in the exchange rate to import prices and final consumer prices was uncertain, and likely to vary over time depending for instance on the underlying economic reasons for the change in the exchange rate."
The Federal Reserve's (Fed) James Bullard will deliver a speech later in the US session. Last night Chicago Fed Bank President Charles Evans repeated his comments from Friday, urging for later, careful rate hikes.
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Sterling hits 8-month low vs euro as consumer prices fall
A surprise fall in British consumer prices in September drove sterling to its weakest in eight months against the euro on Tuesday, overturning any positive fallout for the pound from the confirmation of a major merger.
The pound had touched a three-week high against the dollar in early trade in Europe on the back of SABMiller's acceptance of a cash and share offer from Anheuser-Busch InBev, the world's largest brewer, worth 69 billion pounds.
But that all turned as data showed British inflation dipped back below zero last month, missing forecasts for a flat reading. Those numbers will be followed on Wednesday by British earnings data, which the Bank of England also watches closely as it considers when to raise interest rates.
"We obviously need to see what the labour market has to tell us tomorrow but (the inflation data) makes the case that we're nowhere near raising rates any time soon," said Barclays currency strategist Nikolaos Sgouropoulos.
The pound fell sharply just before the inflation numbers came out and continued to weaken afterwards, amid trader speculation that the numbers had been released early. The euro climbed as much as 1.1 percent on the day to trade at 74.93 pence, its strongest since early February.
Against the dollar, the pound fell 0.7 percent on the day to $1.5206, having earlier hit $1.5388.
The first parliamentary appearance by new Bank of England policymaker Gertjan Vlieghe also weighed on sterling. He said the next move in interest rates would probably be a rise, but pointed to a number of headwinds for growth both globally and domestically.
A number of other players in the market, however, emphasised the likely positive impact of the SAB Miller deal. Citi strategist Josh O'Byrne said he remained positive on the pound.
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GBP/USD: Broad Sideways; Key Level To Trigger Bearish Signals - UOB
The down-move in GBP/USD appears incomplete but the price action is likely part of a broad consolidation and not the start of a sustained down-move, says UOB Group.
"We view the sharp drop yesterday as part of a broad sideway range and not the start of a sustained downmove in GBP.
The key level is at 1.5140 and this support is as crucial as the 1.5390 resistance. Only a clear break below this level will shift the outlook to bearish.
In meanwhile, expect broad choppy trading within the two levels mentioned above for the next several days," UOB argues.
UK average weekly earnings August +3.0 % vs +3.1% exp.
Latest UK wages/jobs data now out
Softer wages report sends GBP lower
Is The Game Up For GBP? How To Play It? - BofA Merrill
In a note to clients today, Bank of America Merrill Lynch takes stock of the recent developments in GBP and look ahead to the prospects for the pound.
"The current market environment, with a distinct lack of focus on UK data, suggests that GBP will be beholden to global financial market developments as the pound has effectively decoupled from broader UK data trends.
Nonetheless, news flow around cross-border M&A deals involving the UK has picked-up and could provide GBP with some flow support, BofA argues.
"Near-term GBP outlook remains beholden to broader market trends and we believe UK data is taking a back seat for now
Strong upward momentum in GBP following UK election has corrected whilst positioning is effectively neutral.
EUR/GBP looks attractive for medium term shorts based on policy divergence theme. Express this via options rather spot," BofA advises.