GBP/USD forecast - page 17

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UK accountants say British firms likely to cut investment 2016 &2017 due to Brexit vote


Reuters report on a forecast from the Institute of Chartered Accountants in England and Wales

"The forecast came from an analysis by consultants Oxford Economics of a quarterly ICAEW survey published on August 1"
  • Survey showed a steep fall in sentiment after the vote on June 23
  • Subsequent surveys from other organisations showed a partial rebound in sentiment in August
 

British Pound to Euro Exchange Rate: Following ECB Event, 50 Day Moving Average Key to Preventing Further Weakness


We are monitoring a key support level in the GBP/EUR exchange rate that, if holds, should confirm the recent bout of Euro strength is over.

  • Pound to Euro exchange rate today: 1.1809, 24 hour best rate: 1.1874
  • Euro to Pound Sterling exchange rate today: 0.8468, 24 hour best rate: 0.8496

The Euro has enjoyed a profitable 48 hours leading into the final day of the week. 

The strength was reinforced following Thursday the 8th's ECB policy meeting where no fresh stimulatory measures were announced by European policy makers.

There were was the prospect of the ECB altering the asset purchase programme which would have been taken as a negative for the Euro.

The strength is therefore an expression of relief by traders who were wary to bet on Euro gains in case of a surprise.

President Mario Draghi was clear that he believes the Bank's policies are working and that further economic progress now rests with national goverments.

In fact, Draghi hinted that an extension of QE had not even been discussed at yesterday’s meeting.

This all suggests that the ECB is in no rush to introduce fresh pro-growth and EUR-negative policies.

"Clearly, markets expected more action or, at least, clearer signals from the ECB on additional stimulus measures," note Lloyds Bank Commecial Banking in response to the event.

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Exciting week ahead for the GBP/USD
 
More for USD
 

WSJ's Hilsenrath: Next FOMC meeting 'a close call', but Fed lean to waiting

The latest from the Wall Street Journal's Jon Hilsenrath

  • Federal Reserve officials lack a strong consensus for action a week before their next policy meeting
  • Are leaning toward waiting until late in the year before a huike
  • It is a close call
  • But with inflation holding below the Fed's 2% target and the unemployment rate little changed in recent months, senior officials feel little sense of urgency about moving and an inclination toward delay, according to their public comments and recent interviews.
 

BoE On Hold On Thurs; GBP/USD En-Route To 1.27

This week’s BoE meeting (Thursday) will be the key event risk for GBP and we expect no change in the MPC’s monetary policy settings.

We look for unanimous voting in favour of the status quo for the current APF (9-0) but do believe that dovish Committee member Gertjan Vlieghe is likely to dissent and vote for a cut (8-1). Moreover, we expect the minutes to echo the testimony of Governor Mark Carney and Committee members Jon Cunliffe, Kristin Forbes, and Gertjan Vlieghe to the Treasury Select Committee and think the MPC is comfortable with its recently announced easing package.

A confirmation of this and openness towards further easing, should downside risks to the economy materialize, will likely keep GBPUSD under pressure, in our view.

Barclays targets GBP/USD at 1.27 by the end of the year.

 

Bank of England meeting today - preview

The BoE Monetary Policy Committee announcement is due at 1100GMT

No change is the widely (unanimous really) expected outcome

From Barclays' preview
  • We expect no change in monetary policy settings
  • Expect unanimous voting in favour of the status quo for the current APF (9-0)
  • Expect that dovish Committee member Gertjan Vlieghe is likely to dissent, vote for a cut
  • We expect the minutes to echo the testimony of Governor Mark Carney and Committee members Jon Cunliffe, Kristin Forbes, and Gertjan Vlieghe to the Treasury Select Committee - the MPC is comfortable with its recently announced easing package.
On the GBP:
  • A confirmation of this and openness towards further easing, should downside risks to the economy materialize, will likely keep GBPUSD under pressure, in our view.
 
Pound ranging - the same as everything else
 

'Britain will give up on Brexit if they make negotiations tough enough' - EU official

As reported by The Telegraph


There is an article in The Telegraph (UK) that says an EU official is saying that "Britain will give up on Brexit if they make negotiations tough enough"

The link to the article is HERE

The article goes on to say "British officials are fighting to stop Europe adopting a no-compromise position in talks in the hope that the UK will change its mind about leaving the bloc".

Further the Telegraph says that more than 5 senior EU officials expressed that Britain would reconsider when the "reality of the bureaucratic nightmare" and the "insane act of economic self-harm" starts to truly sink in. 

 

A British Pound Renaissance? Why Sterling is a Buy against Euro and US Dollar at SEB


“Within the G5 we believe concerns regarding the economic implications of Brexit were exaggerated, meaning Sterling to perform satisfactorily in coming months.” - Karl Hammer,  SEB.

Following the vote to leave the European Union on June 23rd the UK currency's precipitous drop saw it at one stage 20% lower than its pre-referendum levels.

At that stage Sterling discounted a, “virtual disaster for the UK economy”, says analyst Karl Hammer at SEB in Stockholm.

Since these lows were reached the currency has recovered about 4% of the losses.

Hammer believes this sell-off is over-exaggerated in the context of the tenor of the economic that has been released since the EU referendum.

Meanwhile, traders have been agressively betting against the currency ensuring that the bet against Sterling is one of the most overcrowded bet on global foreign exchange markets.

Such overcrowded trades are prone to reversals which can be steep if the market suddenly turns.

“With the speculative market net-short the GBP and absent a significant deterioration we expect a Sterling recovery in coming months,” says Hammer.

Hammer sees UK economic fundamentals as being broadly supportive of the Pound:

“While post-Brexit data are still incomplete and uncertainty remains high, we are quite confident the gloomiest forecasts are unlikely to materialise.

“Long-term the objective is to make the UK a 'super-competitive economy.'"

To some extent the recalibration of the economy following the referendum has actually improved some of the UK’s economic fundamentals.

Sterling is weaker, making UK exports more competitive, lower interest rates have made borrowing even cheaper and liquidity provision by the central bank have all helped the economy.

"Within the G5 we believe concerns regarding the economic implications of Brexit were exaggerated, meaning Sterling to perform satisfactorily in coming months," says Hammer.

However, a word of caution is issued as SEB are more skeptical towards further outperformance in 2017 as real negotiations with the EU start up.

Therefore, this would be considered a longer-term trade.

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