GBPUSD news - page 97
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UK data - Lloyds business barometer (July): 29 (prior 6)
Lloyds business barometer (July): 29
prior 6
GBP/USD forecast for the week of August 1, 2016
The GBP/USD pair rallied during the course of the week, but as you can see is still very tight and seem to be consolidating. This is still most certainly a negative market and trend, so I believe that the 1.35 level above is massively resistive, and as a result I feel that it is more likely that we see selling pressure on short-term charts that is easily treated as opposed to trying to hold onto longer-term types of trades in either direction at this point. With this, I am forgoing long-term setups.
Pound under pressure again as PMI data disappoints
The weaker than expected mftg PMI data has sent the pound lower 1 Aug 2016
Softer than expected UK mftg PMI sees cable testing Asian lows of 1.3200 and EURGBP up to Asian 0.8461 highs.
Mftg sector not a huge one for GDP but it all adds to the gloomy picture currently being painted.
Bids at 1.3200 then more at 1.3180 down to 1.3150. Res/offers now into 1.3230 then 1.3250.
Strong offers/res back in place between 1.3300-20. Keep selling those rallies. You know it makes sense. Good two-way business though if you want to buy dips but that remains the risk side imho.
source
July 2016 UK Markit CIPS construction PMI 45.9 vs 43.8 exp
Details from the July 2016 UK Markit CIPS construction PMI data report 2 August 2016
BoE To Announce A Substantial Package Of Easing Measures On Thursday
We expect the Bank of England BoE to announce a substantial package of easing measures on Thursday.
We expect the BoE to cut the Bank Rate by 25bp, down to 0.25%, and look for an expansion in its stock of purchased assets of GBP75bn. Moreover, we also think it is likely the BoE will ease through its Funding for Lending Scheme.
We expect the BoE to maintain a very dovish stance signalling readiness to ease further if necessary. In our view, this should help underpin the market’s expectation of additional easing further down the road.
We estimate that just over 25bp worth of rate cuts and some additional QE has already been priced in but we still think risks for interest rates and GBP are skewed on the downside despite relatively high market expectations.
We expect the GBP to weaken versus the EUR and the USD on the announcement, forecasting EUR/GBP will rise to 0.86 in 1M. Over the medium term, we expect further GBP weakness, forecasting EUR/GBP at 0.88 in 3M and 0.90 in 6M.
source
July 2016 UK Markit CIPS services PMI 47.4 vs 47.4 exp
Details of the July 2016 UK Markit/CIPS services PMI final data report 3 August 2016
Markit says that the data will show Q3 GDP at -0.4%, if sustained.
Westpac on what to expect for GBP on the BoE: "Likely to move sharply"
Morning note from Westpac's Senior currency strategist Sean Callow, on the Bank of England meeting.
BOE cuts interest rates to 0.25% vs 0.25% exp Extends QE by £70bn
Bank of England monetary policy announcement 4 August 2016
GBPUSD smacked down to 1.3207 then trades to 1.3239.
On first look it's round about expectations, maybe a tad higher on QE.
Full statement from the BOE;
Bank of England cuts Bank Rate to 0.25% and introduces a package of measures designed to provide additional monetary stimulus
04 August 2016Monetary policy summary
The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending 3 August 2016, the MPC voted for a package of measures designed to provide additional support to growth and to achieve a sustainable return of inflation to the target. This package comprises: a 25 basis point cut in Bank Rate to 0.25%; a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate; the purchase of up to £10 billion of UK corporate bonds; and an expansion of the asset purchase scheme for UK government bonds of £60 billion, taking the total stock of these asset purchases to £435 billion. The last three elements will be financed by the issuance of central bank reserves.Following the United Kingdom's vote to leave the European Union, the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly. The fall in sterling is likely to push up on CPI inflation in the near term, hastening its return to the 2% target and probably causing it to rise above the target in the latter part of the MPC's forecast period, before the exchange rate effect dissipates thereafter. In the real economy, although the weaker medium-term outlook for activity largely reflects a downward revision to the economy's supply capacity, near-term weakness in demand is likely to open up a margin of spare capacity, including an eventual rise in unemployment. Consistent with this, recent surveys of business activity, confidence and optimism suggest that the United Kingdom is likely to see little growth in GDP in the second half of this year. These developments present a trade-off for the MPC between delivering inflation at the target and stabilising activity around potential. The MPC's remit requires it to explain how it has balanced that trade-off. Given the extent of the likely weakness in demand relative to supply, the MPC judges it appropriate to provide additional stimulus to the economy, thereby reducing the amount of spare capacity at the cost of a temporary period of above-target inflation. Not only will such action help to eliminate the degree of spare capacity over time, but because a persistent shortfall in aggregate demand would pull down on inflation in the medium term, it should also ensure that inflation does not fall back below the target beyond the forecast horizon. Thus, in tolerating a temporary period of above-target inflation, the Committee expects the eventual return of inflation to the target to be more sustainable.The MPC's choice of instruments is based on a consideration of their likely impact on the real economy and inflation. The MPC has examined closely the interaction between monetary policy and the financial sector, both with regard to ensuring the effective transmission of monetary policy to households and businesses, and with consideration for the financial stability consequences of its policy actions.The cut in Bank Rate will lower borrowing costs for households and businesses. However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates. In order to mitigate this, the MPC is launching a Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate. This monetary policy action should help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that households and firms benefit from the MPC's actions. In addition, the TFS provides participants with a cost effective source of funding to support additional lending to the real economy, providing insurance against the risk that conditions tighten in bank funding markets. The expansion of the Bank of England's asset purchase programme for UK government bonds will impart monetary stimulus by lowering the yields on securities that are used to determine the cost of borrowing for households and businesses. It is also likely to trigger portfolio rebalancing into riskier assets by current holders of government bonds, further enhancing the supply of credit to the broader economy. Purchases of corporate bonds could provide somewhat more stimulus than the same amount of gilt purchases. In particular, given that corporate bonds are higher-yielding instruments than government bonds, investors selling corporate debt to the Bank could be more likely to invest the money received in other corporate assets than those selling gilts. In addition, by increasing demand in secondary markets, purchases by the Bank could reduce liquidity premia; and such purchases could stimulate issuance in sterling corporate bond markets. As set out in the August Inflation Report, conditional on this package of measures, the MPC expects that by the three-year forecast horizon unemployment will have begun to fall back and that much of the economy's spare capacity will have been re-absorbed, while inflation will be a little above the 2% target. In those projections the cumulative growth in output is still around 2½% less at the end of the forecast period than in the MPC's May projections. Much of this reflects a downward revision to potential supply that monetary policy cannot offset. However, monetary policy can provide support as the economy adjusts. Had it not taken the action announced today, the MPC judges it likely that output would be lower, unemployment higher and slack greater throughout the forecast period, jeopardising a sustainable return of inflation to the target. This package contains a number of mutually reinforcing elements, all of which have scope for further action. The MPC can act further along each of the dimensions of the package by lowering Bank Rate, by expanding the TFS to reinforce further the monetary transmission mechanism, and by expanding the scale or variety of asset purchases. If the incoming data prove broadly consistent with the August Inflation Report forecast, a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC's forthcoming meetings during the course of the year. The MPC currently judges this bound to be close to, but a little above, zero.All members of the Committee agreed that policy stimulus was warranted at this time, and that Bank Rate should be reduced to 0.25% and be supported by a TFS. Eight members supported the introduction of a corporate bond scheme, and six members supported further purchases of UK government bonds.These measures have been taken against a backdrop of other supportive actions taken by the Bank of England recently. The FPC has reduced the countercyclical capital buffer to support the provision of credit and has announced that it will exclude central bank reserves from the exposure measure in the current UK leverage ratio framework. This latter measure will enhance the effectiveness of the TFS and asset purchases by minimising the potential countervailing effects of regulatory requirements on monetary policy operations. The Bank has previously announced that it will continue to offer indexed long-term repo operations on a weekly basis until the end of September 2016 as a precautionary step to provide additional flexibility in the Bank's provision of liquidity insurance. The PRA will also smooth the transition to Solvency II for insurers.Sterling Drops 200 Pips as BoE Springs Into Action
As widely expected, the Bank of England (BoE) slashed the key interest rate by 25 basis points at today's meeting, bringing the rate to a new historic low of 0.25%,
In addition the central bank announced the revival of the QE program and increased it to £435 billion.
The initial reaction was bearish and the GBP/USD pair dropped 100 pips to fresh daily lows and was trading at $1.3230, down 0.8% on the day, but further on it has dropped as much as 1.5% to trade at £1.3120 as the Bank of England Governor Carney started the press conference follwing the MPC meeting.
"The ability of the BoE to support economic growth is more limited in the current environment with yields already at record lows and the BoE appearing reluctant to adopt negative rates. We continue to expect the pound to remain at weaker levels seeing no fundamental justification for a sustainable rebound at this stage beyond short term position adjustment," analysts at Bank of Tokyo-Mitsubishi wrote on Thursday.
The latest UK economic numbers were mixed. On Wednesday, the services PMI for July came out at 47.4 points and did not move from the first estimate, which was well down from 52.3 in June. The miserable number is a result of Britons deciding to leave the European Union and the worsening economic outlook for the United Kingdom.
However, Tuesday's construction PMI for July wasn't so negative. It topped analysts' expectations and printed 45.9 points, down only marginally from 46.0 in June, while the market had expected the indicator to weaken to 42.4 points.
In addition, the manufacturing PMI released on Monday was revised even lower and printed 48.2 points, which was weaker than the 49.1 points in the initial estimate.
The US session might be calm as there are no major US data on the agenda today, apart from jobless claims and factory orders, with traders slowly turning their attention to Friday's labor market data.
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July 2016 UK Halifax HPI -1.0% vs -0.2% exp m/m
Details of the July 2016 UK Halifax HPI report 5 August 2016