GBP: Two-Sided Risks For GBP N-Term: Where To Target?
GBPUSD appreciated sharply last week as the High Court ruled against
the government’s ability to trigger Article 50 using Royal prerogative.
We think the decision is a setback for PM May but continue to see Brexit
as our only working assumption. Yet political uncertainty will likely
remain elevated ahead of the Supreme Court’s ruling, scheduled for 5- 8
December. GBP upside was further assisted by a shift to a more neutral
BoE policy stance, likely reflecting concerns over the potential
de-anchoring of inflation expectations, owing to currency weakness.
We
see two-sided risks for GBP in the near term, with political and
economic uncertainty adding to the downside, while positioning and
momentum represent near-term upside risks. As a result, we continue to forecast cable at 1.24 by year-end.
UK economic data will likely weigh somewhat on the GBP this week,
although the US election (Tuesday) will likely be a more important
driver of USD crosses.
On the data front,
we forecast IP (Tuesday) to contract 0.6% m/m (consensus: 0.0% m/m,
previous: -0.4% m/m), while looking for manufacturing output (Tuesday)
to contract 0.2% m/m, against a consensus forecast of +0.4% m/m.
Finally, also of interest in the context of the discussion on a
post-Brexit UK, Theresa May will make a trade visit to India (6-8
November).
Pound to Euro and Dollar Pairs Unfold Key Chart Movement Higher
Those analysts
who follow price charts are noting Sterling’s major pairs are undergoing
a bullish revolution which is reflected in a new breakout move.
Over recent days and weeks, both GBP/EUR and GBP/USD have undergone a
metamorphosis from hitting rock bottom to a undergoing a resurrection.
Whilst the US Presidential election poses something of a major risk
to the recovery, only a less likely Trump win is expected to dampen the
spirits of Sterling bulls, and then probably mainly versus the Dollar
only.
Price charts can be extremely telling, and those of GBP/EUR and
GBP/USD have shown a clear break above the trendline which follows the
direction of the dominant trend down.
A break above the trendline, according to chart watchers, is a strong
sign the downtrend is weakening and a reversal may be on the cards.
Although the pair has pulled back to 1.2400 on Monday, it remains above the trendline which is now providing it with support.
Not far below at 1.2372, lies the monthly pivot, another source of
strength since traders often use it as a level from which to fade the
dominant trend.
Ultimately until, these levels are properly broken – indicated by a
move below 1.2277 - the short-term uptrend remains intact and therefore
likely to extend.
As such a break above the 1.2559 highs would trigger assurances of
more upside and probably lead to a continuation up to 1.2700 – over open
ground without major technical impediment.
Chart-watcher Karen Jones of lender Commerzbank is more sceptical
about the upside potential of the pair following the trendline break:
“GBP/USD took out the 5-month down trendline at 1.2341 last week
(following the ruling that the UK government must hold a vote in
parliament before triggering Article 50).
“The market has reached the 1.2500 psychological resistance and it is
interesting to note that all the daily and intraday charts continue to
indicate that this move higher is corrective only and this move should
fail here.”
Jones sees the pair as vulnerable to a break below the October 19
highs at 1.2335, which would open the floodgates to a further move down.
Alternatively, it would require a break above 1.2555 to confirm a new uptrend, with an initial target at 1.2798.
GBP/USD is climbing after forming several spinning top bars on the four hour time frame and rebounding from the support at 1.2380 and under different circumstances I would've opened a long position, but with the US elections looming on the horizon I think I will refrain from any kind of trading.
Clinton Victory to See British Pound Jump vs Euro but Fade vs US Dollar by 1% say Deutsche Bank
Analyst Alan
Ruskin at Deutsche Bank has tonight told clients just how large the
moves in Pound Sterling will be on a Clinton or Trump victory.
Pound to Euro exchange rate spot reference: 1.1246
Pound to Dollar exchange rate spot reference: 1.2402
Ahead of the release of US presidential election results we have seen
the US Dollar benefit as markets price in a Clinton victory.
The 'continuity candidate's' victory would likely see the US Fed pull
the trigger on a rate rise in December with markets pushing this
scenario as high as 85% on polling day.
Confidence indeed.
So what could subsequent currency movements look like following a confirmation of a Clinton victory?
"Monday’s activity provided some strong clues on potential FX price
action were Clinton to win the Presidency. The market response strongly
suggests that while a Clinton victory will play moderately USD positive
versus G4 currencies, favored EM long carry trades financed by the USD
and the other majors will continue to do well," says Alan Ruskin at Deutsche Bank.
A Clinton victory is therefore not entirely priced in by the market
and such an outcome could benefit the currency against the Euro while
inviting more losses against the Dollar.
Ruskin says if Clinton is elected the next President, in the 24 hours
following the election he would broadly anticipate a repeat of the
percentage changes achieved on Monday.
Follow-through beyond that will likely prove limited.
Trump won, but the impact on this pair actually ended up being negligible, at least
for now. Yes, there was volatility, but the pair is now back where it
was yesterday.
The British Pound Rebounds Higher Versus Euro, US Dollar Despite Trump Presidential Election Victory
Donald Trump’s Election Victory Fails to Prevent GBP to USD Exchange Rate Losses
The
Pound to US Dollar x-rate performed more strongly again as Wednesday’s
European session came to an end, as despite the US Dollar strengthening
the Pound also experienced a surprising rally.
With Trump
indicating that Britain may be first in line for a US trade deal and the
European Central Bank (ECB) hinting at further stimulus, some investors
believed there to be less downside risks in the Pound on Wednesday.
Although
Donald Trump’s election victory initially triggered US Dollar losses,
the GBP USD exchange rate fell as the European trading session
progressed.
On Wednesday, the dollar strengthend growth relative to other currencies as the US currency recovered from losses incurred on the background of the shocking news of the victory of Donald Trump in the presidential elections in the United States. GBP/USD rose by 0.32% to 1.2417, falling from a one-month high at 1.2548, reached earlier.
The British Pound to Dollar Exchange Rate Surges as Sterling Finally Catches up to Gilt Yields
An undervalued
Pound Sterling has shot higher by over a percent against the US Dollar
and most other currencies as markets adjust to a world of higher
inflation and rising bond yields.
The British Pound to Dollar exchange rate has shot higher by a
whopping 1.21% at the time of writing and trades just above 1.2550 at
the time of writing, having recovered from a 24-hour low at 1.2354.
The surge towards resistance at 1.2557 is remarkable, particularly as the US Dollar itself is having such a good day.
However, there are even bigger moves to be seen elsewhere with the GBP/ZAR exchange rate cruising higher by 6%.
It would appear that the Pound is arguably the biggest winner of the Trump victory in global foreign exchange markets.
We have witnessed what is being widely touted as the reflation
phenomena since Trump won - markets pricing in higher inflation over
coming years as the new President is tipped to embark on a massive plan
to stimulate the US economy.
This has driven government bond yields higher - including UK gilts.
The British Pound was up against the US Dollar on Friday. By the close of US trading GBP/USD was trading at 1.2599, gaining 0.40%. I believe that the support is now located at the level of 1.2349, Wednesday's low and resistance is likely at the level of 1.2674 - the maximum of Friday's trading.
GBP: Two-Sided Risks For GBP N-Term: Where To Target?
GBPUSD appreciated sharply last week as the High Court ruled against the government’s ability to trigger Article 50 using Royal prerogative. We think the decision is a setback for PM May but continue to see Brexit as our only working assumption. Yet political uncertainty will likely remain elevated ahead of the Supreme Court’s ruling, scheduled for 5- 8 December. GBP upside was further assisted by a shift to a more neutral BoE policy stance, likely reflecting concerns over the potential de-anchoring of inflation expectations, owing to currency weakness.
We see two-sided risks for GBP in the near term, with political and economic uncertainty adding to the downside, while positioning and momentum represent near-term upside risks. As a result, we continue to forecast cable at 1.24 by year-end.
UK economic data will likely weigh somewhat on the GBP this week, although the US election (Tuesday) will likely be a more important driver of USD crosses.
On the data front, we forecast IP (Tuesday) to contract 0.6% m/m (consensus: 0.0% m/m, previous: -0.4% m/m), while looking for manufacturing output (Tuesday) to contract 0.2% m/m, against a consensus forecast of +0.4% m/m. Finally, also of interest in the context of the discussion on a post-Brexit UK, Theresa May will make a trade visit to India (6-8 November).
source
Pound to Euro and Dollar Pairs Unfold Key Chart Movement Higher
Those analysts who follow price charts are noting Sterling’s major pairs are undergoing a bullish revolution which is reflected in a new breakout move.
Over recent days and weeks, both GBP/EUR and GBP/USD have undergone a metamorphosis from hitting rock bottom to a undergoing a resurrection.
Whilst the US Presidential election poses something of a major risk to the recovery, only a less likely Trump win is expected to dampen the spirits of Sterling bulls, and then probably mainly versus the Dollar only.
Price charts can be extremely telling, and those of GBP/EUR and GBP/USD have shown a clear break above the trendline which follows the direction of the dominant trend down.
A break above the trendline, according to chart watchers, is a strong sign the downtrend is weakening and a reversal may be on the cards.
Although the pair has pulled back to 1.2400 on Monday, it remains above the trendline which is now providing it with support.
Not far below at 1.2372, lies the monthly pivot, another source of strength since traders often use it as a level from which to fade the dominant trend.
Ultimately until, these levels are properly broken – indicated by a move below 1.2277 - the short-term uptrend remains intact and therefore likely to extend.
As such a break above the 1.2559 highs would trigger assurances of more upside and probably lead to a continuation up to 1.2700 – over open ground without major technical impediment.
Chart-watcher Karen Jones of lender Commerzbank is more sceptical about the upside potential of the pair following the trendline break:
“GBP/USD took out the 5-month down trendline at 1.2341 last week (following the ruling that the UK government must hold a vote in parliament before triggering Article 50).
“The market has reached the 1.2500 psychological resistance and it is interesting to note that all the daily and intraday charts continue to indicate that this move higher is corrective only and this move should fail here.”
Jones sees the pair as vulnerable to a break below the October 19 highs at 1.2335, which would open the floodgates to a further move down.
Alternatively, it would require a break above 1.2555 to confirm a new uptrend, with an initial target at 1.2798.
read more
Clinton Victory to See British Pound Jump vs Euro but Fade vs US Dollar by 1% say Deutsche Bank
Analyst Alan Ruskin at Deutsche Bank has tonight told clients just how large the moves in Pound Sterling will be on a Clinton or Trump victory.
Ahead of the release of US presidential election results we have seen the US Dollar benefit as markets price in a Clinton victory.
The 'continuity candidate's' victory would likely see the US Fed pull the trigger on a rate rise in December with markets pushing this scenario as high as 85% on polling day.
Confidence indeed.
So what could subsequent currency movements look like following a confirmation of a Clinton victory?
"Monday’s activity provided some strong clues on potential FX price action were Clinton to win the Presidency. The market response strongly suggests that while a Clinton victory will play moderately USD positive versus G4 currencies, favored EM long carry trades financed by the USD and the other majors will continue to do well," says Alan Ruskin at Deutsche Bank.
A Clinton victory is therefore not entirely priced in by the market and such an outcome could benefit the currency against the Euro while inviting more losses against the Dollar.
Ruskin says if Clinton is elected the next President, in the 24 hours following the election he would broadly anticipate a repeat of the percentage changes achieved on Monday.
Follow-through beyond that will likely prove limited.
read more
The British Pound Rebounds Higher Versus Euro, US Dollar Despite Trump Presidential Election Victory
Donald Trump’s Election Victory Fails to Prevent GBP to USD Exchange Rate Losses
The Pound to US Dollar x-rate performed more strongly again as Wednesday’s European session came to an end, as despite the US Dollar strengthening the Pound also experienced a surprising rally.
With Trump indicating that Britain may be first in line for a US trade deal and the European Central Bank (ECB) hinting at further stimulus, some investors believed there to be less downside risks in the Pound on Wednesday.
Although Donald Trump’s election victory initially triggered US Dollar losses, the GBP USD exchange rate fell as the European trading session progressed.
read more
The British Pound to Dollar Exchange Rate Surges as Sterling Finally Catches up to Gilt Yields
An undervalued Pound Sterling has shot higher by over a percent against the US Dollar and most other currencies as markets adjust to a world of higher inflation and rising bond yields.
The British Pound to Dollar exchange rate has shot higher by a whopping 1.21% at the time of writing and trades just above 1.2550 at the time of writing, having recovered from a 24-hour low at 1.2354.
The surge towards resistance at 1.2557 is remarkable, particularly as the US Dollar itself is having such a good day.
However, there are even bigger moves to be seen elsewhere with the GBP/ZAR exchange rate cruising higher by 6%.
It would appear that the Pound is arguably the biggest winner of the Trump victory in global foreign exchange markets.
We have witnessed what is being widely touted as the reflation phenomena since Trump won - markets pricing in higher inflation over coming years as the new President is tipped to embark on a massive plan to stimulate the US economy.
This has driven government bond yields higher - including UK gilts.
read more