GBPUSD news - page 95
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GBP/USD: Sterling Tests $1.33, Relief Rally Continues
Sterling was 0.3% stronger on Wednesday during the morning dealing and was trading around the $1.33 mark, with volatility expected to continue, despite no major UK or US news on the agenda today.
Cable surged from its lows since Andrea Leadsom moved aside in the Conservative Party leadership race on Monday to leave Theresa May as the sole candidate to succeed Prime Minster David Cameron.
"The pound had its best day in weeks yesterday as it carved through a load of stops from 1.3020 right through the 1.3300 level as markets revelled in the prospect of some form of certainty at the top of government. This new found stability may also have tempered some of the prospect of an imminent rate cut at tomorrow’s Bank of England rate meeting, given that credit conditions are significantly easier than they were three weeks ago," Michael Hewson, chief market analyst at CMC Markets UK, said on Wednesday.
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BoE Preview: Bank Seen Cutting Rates in July to Counter Uncertainty
In the face of the profound and direct negative effects of Brexit on UK economic activity, the Bank of England (BoE) is expected to enact more stimulus next Thursday, with both an interest rate cut and additional measures delivered during both the July and August policy meetings.
The only question is what action the Monetary Policy Committee (MPC) will take after the Financial Policy Committee (FPC) slashed the countercyclical-capital buffer rate for UK exposures to zero from 0.5% of risk-weighted assets.
This move should, according to the bank, raise the capacity for lending to households and businesses by £150 billion. The rate should stay at 0% until at least June 2017, according to officials.
The decision of UK voters to leave the European Union has negatively affected both consumer and business confidence, enhancing the case for interest rates to be cut as soon as next Thursday.
BoE Governor Mark Carney stated in a speech at the end of June that in his view the weakened UK economic outlook will likely require some "easing of monetary policy over the summer."
"There has to be a very good chance that the Bank of England will cut interest rates from 0.50% to 0.25% on Thursday," Howard Archer, chief economist at IHS Economics, wrote in a note on Friday.
In a press conference after the FPC meeting this week, the BoE governor indicated that with the UK voting to leave the EU, the downside risks to the economy are now crystallizing and further policy measures are also expected to be delivered.
"We suspect that the Bank of England will extend sooner or later its Funding for Lending Scheme and it may very well also return to Quantitative Easing, which has been on hold since November 2012 with the stock of purchases at £375 billion. These moves could well be enacted in August," Archer further predicted.
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UK construction output May mm SA -2.1% vs -1.2% exp
UK May construction output report 15 July 2016
GBP/USD forecast for the week of July 18, 2016
The GBP/USD pair rose during the course of the week, but found the 1.35 level to be far too resistive to continue going higher. We pulled back about half of the gains, and having said that it appears that the market will continue to go lower but I think this could be easier to trade this market off of the shorter-term charts, as we should continue to go lower due to people being concerned about the United Kingdom leaving the European Union. In the meantime, though, I have no interest in buying.
GBP/USD Weekly Outlook: Full UK Calendar to Cause Volatility
The UK calendar starts on Tuesday with inflation indices, including CPI, RPI, HPI and PPI. The headline CPI number should stay at 0.3% in June year-on-year, while the core gauge is expected to tick higher to 1.3% from 1.2% booked in May.
On Wednesday, labor market data are due. The jobless rate is predicted to stay at 5.0%, while jobless claims is expected to tick higher. The focus will also be on average weekly earnings for May.
Retail sales for June will be published on Thursday and the market anticipates a notable slowdown here, which might drag the pound lower again.
Sterling bears retreated after last week's Bank of England surprise, when it left the rate unchanged at 0.5%. However, the trend is still bearish and rallies should be sold, as long as the pair trades below $1.35.
"A whole host of data indicate a sharp drop in confidence that will no doubt become evident in the hard data in the coming months. The RICS Housing report yesterday was pretty grim with the Sales Expectations index plunging from -5 to -26, the weakest reading since the data series began in 1998. The flow of grim economic data from the UK is unlikely to change any time soon," analysts at Bank of Tokyo-Mitsubishi wrote on Friday.
From the US dollar perspective, building permits and housing starts are due on Tuesday, both for June and both are expected to improve month-on-month.
The next batch of data is due on Thursday and includes the usual jobless claims, the Philly Fed manufacturing index for July, existing home sales for June (expected to post a 1.1% monthly decline) and leading indicators.
UK CPI Preview: Petrol Prices Set to Lift Inflation
In the post-Brexit environment the price level is expected to rise as higher petrol prices feed into the consumer basket as the post-Brexit sharp depreciation in sterling has not been reflected in the price indices as yet.
The CPI is expected to have risen to 0.5% over the year in June from 0.3% in May, matching March’s highest level since December 2014, the Office for National Statistics is scheduled to say on Tuesday at 9:30 am London time.
The average price of North Sea oil rose 9.4% in sterling terms during the month of June compared to the average prices in May. The UK wide average price of the unleaded 95 octane fuel reached £1.116 in June, some 2.2% higher compared to May, while diesel prices rose some 2.5% over the month in June to £1.118, the AA fuel price report for June said.
"Inflation is expected to have been primarily pushed up in June by higher petrol prices. Sterling’s sharp plunge following the UK’s vote to leave the EU on 23 June will have occurred too late to have had any impact on inflation in June, and it will likely take time to feed through," Howard Archer from IHS Markit noted ahead of the inflation data release.
Inflation rates in the UK are well off the 2% inflation target set by the Bank of England (BoE) and the set of inflation data on both consumer and producer prices are unlikely to have any material affect on the Bank, given the decision of UK citizens to leave the European Union (EU) in the June 23 referendum that has shifted the short-term policy goal of the BoE to economic stabilization.
The BoE's August Inflation Report scheduled for August 4 will see the Bank's fresh inflation and growth forecast together with a likely interest rate cut, that had been highly anticipated during last week's MPC meeting, but which was actually supported by just Gertjan Vliege.
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Here's what the top 10 GBP forecasters expect.
The median estimate for GBP/USD by year end is 1.27 according to Bloomberg' survey of its best 10 forecasters
Preview: UK CPI (Jun) - SEB
U.K. Inflation Quickens More Than Forecast on Airfare Surge
U.K. inflation accelerated more than economists forecast in June, boosted by airfares on trips to continental Europe.
The rate rose to 0.5 percent from 0.3 percent in May, the Office for National Statistics said in London on Tuesday. Economists had expected 0.4 percent, according to the median estimate in a Bloomberg survey. Core inflation, which excludes volatile food and energy prices, strengthened to 1.4 percent.
Airfares jumped 11 percent in June from May, partly due to the Euro 2016 football championship in France, which saw England progress to the second round of the tournament before losing to Iceland. The ONS said the rising cost of oil also helped to “nudge up” the index.
While the reading is still well below the Bank of England’s 2 percent target, it matches the highest level since late 2014 and economists say the pound’s drop since Britain’s decision to quit the European Union will probably help push it even higher. The central bank signaled last week it’s readying stimulus for August as the economy reels from the Brexit fallout.
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GBP/USD: Sterling Declines Sharply Despite Improving Inflation
terling dropped around 1% on Tuesday as sellers returned to the market, pushing the pair down to $1.3130 during the US session.
Earlier in the day, UK CPI for June improved and topped analysts estimates.The yearly change jumped to 1.4% from 1.2%, while analysts had expected a rise to 1.3%. The monthly print came at 0.2% as expected and the year-on-year change of core CPI printed 0.5%, up from 0.3% previously.
These data provided only a very short-term relief for the pound as it continued to decline amid US dollar strength and a possible monetary policy easing by the Bank of England in August.
"While June's rise in consumer price inflation had little to do with the pound's sharp fall since the vote for Brexit, sterling weakness does look set to increasingly feed through over the coming months to markedly push inflation higher as it raises prices for imported goods and services, oil and commodities. We suspect that the pound is headed for further weakness despite its recent stabilization," Howard Archer, Chief UK + European Economist at IHS Global Insight commented on the numbers.
More data will come throughout the week. On Wednesday the UK jobless rate is predicted to stay at 5.0%, while the jobless claims change is expected to tick higher. The focus will also be on average weekly earnings for May.