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Strong demand into 1.2800 is now history 4 Oct
New post-Brexit and 30 year lows OF 1.2770 now for GBPUSD
Stops triggered through 1.2800 with more reported through 1.2770 as per the order board just posted.
At the risk of severe repetition I remain core short and a rally seller.
GBP/USD hits 31-year lows despite U.K. data
The pound fell to 31-year lows against the U.S. dollar on Tuesday, despite the release of upbeat U.K. construction activity data, as concerns over a potential hard Brexit dominated market sentiment.
GBP/USD slid 0.39% during European morning trade before settling at a 31-year low of 1.2786.
Research firm Markit said its U.K. construction purchasing managers' index rose to 52.3 in September from August’s reading of 49.2. Economists had expected the index to drop to 49.0 in September.
But the pound remained under broad pressure amid concerns over a ‘hard brexit’ after British Prime Minister Theresa May set a March deadline to begin the UK's formal departure process from the European Union.
Meanwhile, the greenback was boosted after the Institute for Supply Management said on Monday that its index of manufacturing activity rose to 51.5 last month from August’s reading of 49.4. Analysts had forecast a lesser increase to 50.3.
The report added to optimism over the strength of the ecnomy after Friday’s upbeat U.S. consumer sentiment data.
Market participants were also focusing on Friday’s U.S. nonfarm payrolls report for further indications on the strength of the job market, as the Federal Reserve has indicated that future interest rate decisions will be data-dependent.
Sterling was fractionally lower against the euro, with EUR/GBP up 0.09% at 0.8742.
source
1985 Lows Hit by Pound to Dollar Exchange Rate on Tuesday, More Losses Forecast
GBP/USD has recorded its lowest level in over 30 years on Tuesday and studies suggest further losses are now likely.
At the time of writing the Pound / Dollar rate trades at 1.2769, the previous 2016 multi-year low was set at 1.2796.
Pound Sterling has been sold agressively on confirmation by the UK’s Prime Minister May that Article 50 of the Lisbon Treaty will be triggered before the end of March 2017 which will begin a two-year negotiation process to leave the EU.
While clarity is welcomed, it appears that traders sold GBP on May’s tough stance on the nature of negotiations.
The Government appears keen to make control over EU immigration a red line in negotiations which will likely mean the UK loses access to the European single market.
The freedom of movement of people between members of the single market is a fundamental cornerstone of the agreement.
The imposition of tariffs on UK imports by Europe, and potential loss of financial passporting, would likely have a negative impact on economic growth over coming years.
Details on what the UK will aim for in negotiations remain thin.
May says it won't be a Swiss or Norwegian model (Norway has full single market access; Switzerland access for most industries) but claims, "I want to give British companies the maximum opportunity to trade in and operate in the single market".
"The more limited the access to the single market, the worse for GBP," says Elsa Lignos at RBC Capital Markets.
read more
Pound to Dollar Rate at 1.23 Possible say Societe Generale
The British Pound is under renewed selling pressures on Wednesday the 5th of October with GBP/USD extending its three-day decline to reach 1.27 at the time of writing and more losses are possible.
The fall in the GBP/USD rate following Theresa May’s Conservative party conference speech has taken Societe Generale's Kit Juckes by surprise.
Over the weekend Theresa May took the proverbial stick in hand and drew an emphatic line in the sand before party members promising Article 50 would definitely be triggered by the end of March 2017.
“Confirmation that the UK Government plans to trigger article 50 by the end of Q1 2017 hit Sterling harder than I expected yesterday,” says Juckes in a recent note to clients.
The GBP/USD closed September at 1.2978 and by Wednesday 5th October FX markets were looking at the weakest value in the pair since February 1984 with a low of 1.27 being seen.
Surely Sterling is now looking oversold?
“Some sort of a bounce is possible but the noises from the Conservative party conference aren't helpful,” says Juckes.
A hardening stance on immigration combined with an apparent ambivalence over remaining in the trading part of the Union, known as the Common Market, have set nerves on edge and sent the pound down.
Juckes notes:
“The government showing any signs of shifting a position where control on immigration is the hardest of lines in negotiations to leave the EU, and won't be sacrificed or watered down in order to keep access to the single market, particularly for financial services.
"There's nothing there to soften the outlook for sterling, at all."
And so we see Sterling tumble – but what of the outlook for the future?
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September UK Services PMI Dips to 52.6, Recovery Momentum Slows
The UK Markit/CIPS PMI services-sector index edged lower to 52.6 for September from 52.9 the previous month. This followed the big increase in August’s data and was slightly above the consensus forecast of 52.2. The third-quarter reading was the slowest since the fourth quarter of 2012 and underlying concerns surrounding the outlook will continue as Brexit uncertainty continues.
New business rose at the fastest pace since February, although it was still below the longer-term average, with overseas client orders boosted by Sterling weakness. There was also a recovery in confidence following the initial UK referendum shock. In this context, outstanding business levels rose for the second successive month.
There was a further net increase in employment at the fastest pace since April.
There was further upward pressure on costs with an acceleration to the highest level since February 2013 and the index was also above the 20-year survey average. The increase in charges by service providers also increased at the sharpest pace since the beginning of 2014.
The data overall will maintain concerns that the EU negotiations will have a significant impact on the services sector, especially in the financial sector, and there will be the risk of longer-term under-performance.
British Pound Recovers from Recent Lows Against Euro, Dollar Aided by UK Services PMI Data + Profit-Taking
Sterling has edged above multi-year lows thanks to some better-than-forecast data out of the all-important UK services sector and a bout of profit-taking by traders intent on profiting on the currency's decline.
~ Pound to Euro exchange rate, 1 GBP = 1.1369
~ Pound to Dollar exchange rate, 1 GBP = 1.2722
A little relief for GBP has been offered by a combination of strong data and profit-taking actions by currency traders.
Service PMI data from IHS Markit and the CIPS for September confirmed the UK economy remains comfortably in growth mode.
The figure reported was 52.6 above 52.2 which was the number being forecast by analysts. However, it was lower than the previous month’s 52.9.
New business in the sector, which accounts for over 80% of the UK economy, rose at the fastest pace since February and the rate of job creation picked up.
The survey data signalled a strengthening trend in new business inflows, as companies reported new opportunities and customer enquiries, rising demand from overseas clients linked to the weak Pound Sterling and client confidence recovering after the initial Brexit vote shock.
“Across the three sectors, the pace of economic growth signalled was the strongest since January, fuelling greater job creation as companies shrugged off short-term Brexit worries and enjoyed the benefits of a weaker currency," says Chris Williamson, Chief Business Economist at IHS Markit.
When we take the construction, manufacturing and services data together we are left with the average level of the economy-wide composite PMI for Q3 consistent with GDP growth of about 0.2%.
"While this is a considerable slowdown from the 0.7% expansion seen in Q2, it is still better than most were expecting in the immediate aftermath of the referendum. And if the PMI remains around its current level then we could even see growth accelerate in Q4," says Paul Hollingworth at Capital Economics.
read more
These via the WSJ round-up
"When you have that big a move you're triggering a lot of things on the way down, like stop losses and options barriers, which exacerbate the whole move"
UK Halifax house price index Sept mm +0.1% vs 0.0% exp
UK Sept Halifax house price index report 7 Oct
As the GBP questions continue European desks have busy selling 7 Oct
Reported strong bids/demand at 1.2350 now smashed to post 1.2330 in a rush.
Next line of reported bids around 1.2300 but it's all a bit sketchy after last night's collapse. We might expect 1.2320-25 to bring a little support.
GBP supply getting a boost from EURGBP climbing back over 0.9000 to post 0.9022 as I type
Reuters reporting that 6-month GBPUSD risk reversals to trade off the expected Article 50 trigger in March are showing the greatest bias for GBP weakness since early July.GBP/USD forecast for the week of October 10, 2016
The GBP/USD pair broke down rather rapidly on Friday, making for a very negative candle for the week. We slammed into the 1.20 level below, which was of course my longer-term target. Now that we have hit that and then bounced massively, I believe that the market will probably selloff again, but you probably have to do it off of shorter-term charts as there isn’t much room to move at this point in time but I obviously have no interest in buying whatsoever. With this, I believe that the 1.2850 level above is the “ceiling.”