GBPUSD news - page 114
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UK BBA mortgage approvals Nov 40.659k vs 41.4k expected
UK November BBA mortgage approvals report 28 Dec
The British Bankers' Association (BBA) Mortgage Approvals measures the number of new mortgages approved by BBA-backed banks during the previous month. It includes more than half of the total U.K. mortgage market. It provides information about the buyers in the housing market in the U.K.
UK Nationwide house price index Dec mm +0.8% vs +0.2% exp
UK December Nationwide house price index report 29 Dec
Nationwide says:
"Low interest rates are expected to help underpin demand while a shortage of homes on the market will continue to provide support."
They repeat their call that prices are likely to rise by around 2% in 2017 although that's dependent on how the economy performs.
GBPUSD nudges higher to 1.2261 session highs but still capped by underlying EURGBP demand for the moment. Further month-end interest can not be ruled out although last week's rally was reported to have taken care of most of it.
2017 GBP/USD Annual Forecast
GBPUSD had a very volatile and interesting year in 2016 as it experienced the stratosphere as it went as high as 1.50 during the early part of the year but by the end of the end, it saw the mariana trench as well as it fell down to as low as 1.16. Two major events marked the rise and fall of the pair and those were the defining moments for the pair as far as 2016 was concerned.
The first was the Brexit vote that was held in June. This was a vote where the people of the UK had to decide on whether to stay in the Eurozone or decide to break off from the bloc for good. The opinion polls predicted a tough contest but it was assumed that come voting day, better sense would prevail and people would vote for status quo to be maintained. It did look so even halfway through the counting (which pushed the GBPUSD pair to as high as 1.5) but then the tide changed and the final decision was that the people voted to go out of the Eurozone. This caused a huge fall in the pair as it fell down 1800 pips during the course of the day and crashed to the 1.32 region. This was indeed a seismic event as it possibly meant that the UK would give up on the free market access to the Eurozone. This forced the PM to resign as those in favor of Brexit took over and it became clear that the UK will never be the same again.
The next event took place in December where, inexplicably, the pair more than a 1000 pips in early morning trading within a few hours. Though the statements from some of the UK and Euro leaders were blamed but the more logical explanation was for a case of a “fat-finger” under some thin liquidity conditions. Though the pair recovered most of the fall within the same day, the effects are felt even today as the pair continues to trade weakly.
Looking ahead to 2017, there are some fundamental issues which are likely to keep the pair under pressure for a long time during the year. The first one is obviously the strength in the dollar which is going to be a recurring theme in 2017 with the Fed scheduled to make 2-3 rate hikes during the course of the year and these need to be priced into the markets and this would keep the dollar strong in the medium term. The next bigger headache for the pound would be the actual Brexit process. The courts have ruled that there needs to be a debate in the Parliament surrounding the invocation of Article 50 and it is likely that Parliament would like to have a say in every stage of the process. Then we have the issue of Scotland, which voted to stay in the Eurozone but now has to exit it as the whole of UK wanted to exit, trying to come up with plans to see how it can stay in the bloc while the UK exits it. If these are the internal issues which the UK government would need to sort out, then comes the actual matter of the negotiations with the Euro leaders on what would envisage the Brexit, what would be given, what would be taken etc.
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GBP/USD Losing Ground Following Last Week’s Advance
Thin trading conditions on Friday called into question the ability of GBP/USD to sustain the break above resistance at the 1.2300 level and, in today’s trading, the pair is lower, currently holding near 1.2296, down 0.40% from Friday’s close.
On a further move lower, support stands at last week’s low near 1.2200, followed by 1.2100, representing the lows established October 11 and 25. Key support below this level is at the October 7 flash crash low at 1.1950.
On the upside, resistance is now at Friday’s 1.2388 high. A sustained break above this level is required to suggest a move to the next level of resistance at 1.2500 is forthcoming.
Longer term, GBP/USD has essentially been consolidating since bottoming in October 2016. A sustained breakout from the consolidation phase, the high of which is at 1.2775 and represents a test of the lows established in July and August of 2016 at the 1.2800-1.2866 zone, is required to suggest an important, sustainable bottom has been established and a broader uptrend is underway.
Following today’s holiday in the U.S. and U.K., one of the main focuses in this week’s trading will be the U.S. employment report, due to be released on Friday. Consensus estimate is for an increase of 175K, following a reading of 178K in November. This report will be important in regard to the pace of interest rate increases in 2017.
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British Pound To Dollar 5-Day Forecast To Trend Lower On Softened UK PMIs
US data proved less than encouraging in the last week, allowing the Pound US Dollar exchange rate to make some cautious gains, but can it keep pushing higher in 2017?
There was some disappointment when November’s US trade deficit was revealed to have widened further than anticipated, particularly as this was coupled with an increase in jobless claims.
However, the US Dollar (USD) was quick to recover from its initial downtrend as investors remained assessed that this bearish data was not likely to be enough to deter the Federal Reserve from raising interest rates again in the near future.
As risk appetite generally faded the Pound US Dollar (GBP USD) exchange rate lost some of its momentum in the final trading session of 2016, although the pairing maintained a narrow uptrend.
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UK mortgage approvals Nov 67.5k vs 68.5k exp
UK Nov mortgage approvals and lending data 4 Jan
UK official reserves Dec change USD +29m vs -1.83bln prev
UK official reserves Dec report now out from the BOE 5 Jan
The change might seem extreme on first sight but not uncommon in what has essentially been a +/-$2bln contained range.
The UK's official holdings of international reserves comprise gold, foreign currency assets, International Monetary Fund (IMF Special Drawing Rights (SDRs), and the UK's Reserve Tranche Position (RTP) at the IMF.
With the exception of the RTP, these reserves are held in a government account administered by Her Majesty's Treasury (HMT) which is known as the Exchange Equalisation Account (EEA) created in 1932.
source
The British Pound is Significantly Undervalued says Deutsche Bank
Analysts at Deutsche Bank have run the figures and have concluded Pound Sterling to be one of the world’s most undervalued currencies as we head into 2017.
Of 31 currencies analysed by the investment bank, the Pound is the third cheapest based on a DBeer valuation.
The DBeer model is Deutsche Bank’s own version of the BEER model (Behavioural Equilibrium Exchange Rate) which is a well-used method of calculating valuations amongst economists.
The model essentially attempts to gauge whether a currency is over- or under-valued in relation to its economy.
Interestingly, for those looking for a potential trade spat between Donald Trump and China, the Chinese Yuan is now one of the world's most overvalued currencies.
As we note here, this corners Trump into having to change the goal posts when it comes to defining currency manipulators.
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The GBP/USD pair went back and forth during the course of the week, testing the 1.25 level above. The market looks very neutral, but ultimately, I believe that the downtrend will continue. An exhaustive candle would be reason enough to start selling, especially near the aforementioned 1.25 handle. A short-term candle that show signs of exhaustion could be a nice opportunity. The 1.20 level below is my target, and if we can break down below there I feel that we go to the 1.15 handle underneath that level.
GBP/USD Weekly Forecast January 9-13
GPB/USD gained ground on Wednesday and Thursday in last week’s trading, reversing losses that were produced earlier in the week. However, the pair failed to sustain the upside momentum and turned lower on Friday, as the dollar rallied ahead of and following the release of the December U.S. employment data. GBP/USD ended the day at 1.2282, down 0.52% for the week overall.
The U.S. employment report indicated that U.S. job growth is slowing, while wages are rising. There was a notable increase in average hourly earnings growth, year-over-year. At 2.9%, this is the highest rate since May 2009. This should benefit consumer spending, and will also work to spark expectations for higher inflation. This, in turn, could increase the pace of interest rate increases in 2017, a factor that should help the dollar and, in turn, put pressure on GBP/USD.
Sterling struggled to sustain a gain last week despite the latest U.K. PMI report indicating improvement in the manufacturing sector. Last week, the Markit UK PMI manufacturing index strengthened to 56.1 for December from a revised figure of 53.6 in November, which was originally reported as 53.4. This was the highest reading for 30 months and well above consensus forecasts of a slight decline to 53.3. It appears sterling continues to struggle due to investors’ nervousness regarding Brexit.
Today, British Prime Minister Theresa May held an interview with Sky New, her first interview in 2017. Although May has revealed little about her strategy of pulling out of the European Union, comments made on Sunday in the interview suggest that exit negotiations will be extremely painful, according to a report from CNN Money. These comments could put continued pressure on sterling in Monday’s trading.
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