Non-Farm Payrolls Key for Cable, Can 1.2 Hold vs EUR? - GBP Live on Friday 8/11
The British pound sterling (GBP) is at a key level against the Euro this morning; can the October highs be broken in coming sessions? All depends on the strength of the Euro which continues to suffer following yesterday's shock ECB rate cut. Today we have Non-farm payroll data to look forward to as well as UK trade data.
Rates as of last update
The pound to euro exchange rate is unchanged on a day-to-day basis at 1.2.
The pound to US dollar is 0.4 pct lower at 1.6043.
The pound Australian dollar exchange rate is 0.18 pct higher at 1.7049.
The pound New Zealand dollar is 0.22 pct lower at 1.9460.
NB: All quotes here are taken from the wholesale spot markets; your bank will subtract a spread at their discretion when delivering a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering up to 5% more currency. Please learn more here.
14:00: Bank of England may try and hurt GBP next week
The big event next week is the Bank of England Quarterly Inflation Report at 10:30 on Wednesday.
Dr. Vasileios Gkionakis, Global Head of FX Strategy at UniCredit Bank in London reckons this could well be a GBP-negative event:
Recently released strong UK data provided cable with a firm footing, and we suspect this picture to persist until the release of next week's BoE Inflation Report.
In light of the more hawkish tone of its October minutes, we expect the BoE to upgrade its GDP growth forecast and to lower the expected path for the unemployment rate – albeit modestly for fears of pushing market rates higher.
"The latter would probably cause some disappointment among market participants and, thus, would likely hurt cable to a certain extent. As for EUR-GBP, we expect slightly lower levels."
13:34: GBP also a NFP winner
The US dollar may be the obvious winner of a strong NFP print as markets begin to factor in an earlier Fed taper. However, the GBP is also a winner; albeit less obvious.
Strong gains are being seen against the Australian dollar - an obvious beneficiary of Fed tapering. The GBP/EUR has also recovered earlier losses - when EUR/USD slumps GBP/EUR tends to do well.
13:30: US dollar shoots higher on strong NFP numbers
The Non-Farm Payroll report for October came in at 204K, well ahead of consensus estimates for 125k.
The unemployment rate is still at 7.3%.
The US dollar is the big winner; EUR/USD has slumped by 0.43 pct to 1.3366.
The pound dollar rate is 0.42 pct lower at 1.6030.
11:40: Euro putting on a gutsy performance
The euro is such a tough customer. Despite the low Eurozone inflation and and an ECB rate cut the EUR continues to show its stubbornness to being sold.
Boris Schlossberg at BK Asset Management says:
"Despite the sclerotic growth in France, the S&P downgrade and yesterday's surprising 25bp cut from the ECB, the euro has remained remarkably resilient holding above the 1.3400 level throughout the European session trade. The unit continues to benefit from capital flows as foreign investors are lured by the prospect of recovery in the region as a whole.
"Therefore for now it remains exceedingly difficult for European monetary policy makers to lower the value of the currency in any sustained fashion and this dynamic will likely remain in place until the market becomes more certain that the Fed will taper by the start of next year."
Indeed, capital flows and central bank buying is the most likely explanation for the below mentioned slump in GBPEUR.
11:09: GBP/EUR at 1.25 next year (but be patient!)
Sean Lee at FXWW is forecasting GBP/EUR at 1.25 next year:
"The weekly chart confirms to me that EUR/GBP is near the bottom of a downward sloping channel; the trend is bearish and I still expect to see prices below .80 (GBPEUR @ 1.25) early next year but this pair doesn’t move fast so patience is required.
"I’d suggest that .83/.85 (GBPEUR @ 1.2048/1.1765) will contain for the next few weeks and as we know, this pair will edge higher as CB buying kicks in towards the end of the month."
11:02: Interesting slump in GBP/EUR
The GBP/EUR has recovered after a strange slump witnessed at 09:52. The slump was a full 22 minutes after the release of underwhelming trade data; so the data itself is not explanatory. GBP/EUR has recovered to the 1.1970 area.
10:55: Lloyds backing a steady climb in GBP/EUR to 1.22; GBP/USD seen steady
Lloyds Bank Research have chimed in with their predictions for sterling:
"GBP/USD today is likely to depend more on US data. We still see medium term upside scope for GBP given the continuing strong tone to UK data, but whether this comes against the USD or the EUR today will likely depend on the US numbers. GBP/EUR at 1.20 is seen as a significant level, and may hold it short term, but we would expect a steady move towards 1.22."
09:00: Forecasting GBP/EUR at 1.22
Read our morning coverage of the pound to euro rate. One analyst says the door is now open for GBP/EUR to test 1.22.
08:55: GBP/USD still bearishly aligned
While the GBP/EUR may be looking aggressive, the same can't be said for Cable. Ipek Ozkardeskaya at Swissquote Research points out:
"GBP remained well bid above the 21-day moving average (1.6077) in Asia. Trend and momentum indicators are still in the red zone (MACD below the zero line) limiting the upside. A close above the weekly high of 1.6118 should boost the GBP-bulls."
07:45: Pound euro exchange rate under the hammer
The big news on FX markets at present remains the hefty slump in the euro. The ECB cut rates yesterday; a move that caught markets off-guard. We warned that a general grind lower by EUR is now possible.
Today the GBP/EUR is back at 1.2, this is clearly an important level - will GBP be able to hold these gains ahead of a fresh push higher? It failed to do so at the start of October when we were last here. However, this time around the picture facing the Euro is a great deal less supportive, so GBP has a good chance of delivering.
07:40: What matters for GBP?
Camilla Sutton at Scotiabank points out that inflationary data will be a key driver of the British pound (GBP):
"The most important upcoming GBP releases are: CPI on November 12th and
the Inflation Report on November 13th followed by the financial stability report on November 28th."
07:20: US dollar strengthens
A key theme of FX markets at present is the strength of the US dollar. A consistent improvement in U.S. data has eased the market's concerns about a weak U.S. recovery and raises the odds of earlier tapering by the Federal Reserve.
07:16: Non-farm payrolls due today
The biggest data event on the monthly calendar is due today and will likely be an important driver of the headline GBP/USD rate. Economists are looking for non-farm payrolls to rise by 120k in the month of October, down from 148k the previous month.
"Unfortunately the range of estimates is wide with the most pessimistic economist calling for only 50k job growth and most optimistic forecasting a rise of 175k jobs. Investors are bracing a weaker release because the government shutdown put hundreds of thousands of federal employees and private contractors out of work for weeks," says Kathy Lien at BK Asset Management.
Payrolls are released at 13:30 GMT.