British Pound (GBP): "In the medium term we still favour GBP upside" - Lloyds Bank: 25/02
- Written by: Gary Howes
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16:10: GDP data to dominate Wednesday's trade
We finally get some UK economic data to consider. Gross Domestic Product (QoQ) (Q4) is predicted to come in at 0.7%, just below a previous reading of 0.8%. Gross Domestic Product (YoY) (Q4) is predicted at 2.8%, above a previous 1.9%.
We doubt any misses on the data will have a strong impact on sterling. For those looking to position for any upcoming volatility, this strategy on tradingpedia could be of interest.
We doubt any misses on the data will have a strong impact on sterling. For those looking to position for any upcoming volatility, this strategy on tradingpedia could be of interest.
16:07: Ahead of UK GDP data release expect volumes to thin
Trading volumes in Sterling are tipped to ease overnight and into tomorrow morning's session.
The British pound is currently seen trading at the highs of its daily range, near the 1.6720 level.
"It is important to be cognizant of the fact that UK GDP will be released tomorrow, which will more than likely cause a slightly lower flow day for the pound as traders hesitate to take large positions prior to the release," says Jonathan Terela at Western Union.
The British pound is currently seen trading at the highs of its daily range, near the 1.6720 level.
"It is important to be cognizant of the fact that UK GDP will be released tomorrow, which will more than likely cause a slightly lower flow day for the pound as traders hesitate to take large positions prior to the release," says Jonathan Terela at Western Union.
15:04: Spring interest rate hike in play
Sterling rallied against the dollar and the euro after a BOE policymaker said that market expectations for a spring 2015 rate hike were not unjustified.
The comments reinforced expectations for the BOE to lead in eventual monetary tightening, a scenario that remains very positive for the British pound.
The comments reinforced expectations for the BOE to lead in eventual monetary tightening, a scenario that remains very positive for the British pound.
14:16: Sterling strength not a concern foe BoE
There has been some Bank of England speak today which has proven to be supportive for GBP. As recounted by Camilla Sutton at Scotiabank:
"GBP is strong, up 0.2% and flirting with a break back above 1.6700 as home loan data and CBI reported sales came in above expectations. While the BoE’s McCafferty suggested that the level of GBP is not a major problem for exporters but that if it rose further he would be more worried. While the BoE’s Weale suggested that as the economic backdrop has changed and accordingly policy has also changed. Tomorrow’s second estimate of Q4 GDP is unlikely to shock markets."
"GBP is strong, up 0.2% and flirting with a break back above 1.6700 as home loan data and CBI reported sales came in above expectations. While the BoE’s McCafferty suggested that the level of GBP is not a major problem for exporters but that if it rose further he would be more worried. While the BoE’s Weale suggested that as the economic backdrop has changed and accordingly policy has also changed. Tomorrow’s second estimate of Q4 GDP is unlikely to shock markets."
13:39: Are euro pound exchange rate losses set to accelerate?
Kristian Siggaard-Jensen at the Saxo Trading Floor says the EUR/GBP decline is to accelerate to the downside below 0.8240:
"EURGBP is finding support in the early European trading session around 0.8240 but the upside has so far been capped by 50 percent retracement in the 0.8349-0.8156 wave. Therefore, we are looking for a potential upside exhaustive pattern if spot manages to break through 0.8240."
"EURGBP is finding support in the early European trading session around 0.8240 but the upside has so far been capped by 50 percent retracement in the 0.8349-0.8156 wave. Therefore, we are looking for a potential upside exhaustive pattern if spot manages to break through 0.8240."
12:51: Potential for further EUR/GBP downside
Kathleen Brooks at Forex.com tips the euro for further downside vs the British pound:
"The pound is the second best performing G10 currency vs. the USD today after better than expected mortgage approval data for January. Mortgage approvals rose to nearly 50,000 at the start of the year, which is the fastest pace since 2007.
"After wavering a little last week on the back of some data misses, this was just the tonic that the GBP bulls needed. It has staged a recovery after losing ground in recent sessions to the EUR and GBP. EURGBP failed to break above a key resistance zone yesterday at 0.8277 –85 – the 61.8% retracement of this month’s sell off and the 50-day moving average - which capped EURGBP upside and reignited downward pressure on this pair.
"Momentum indicators also indicated the potential for further downside, after the daily MACD crossed below its zero line earlier today.
"European fundamentals are also not helping the situation for EURGBP, Italian retail sales were weaker than expected and Spain’s economy ministry announced that it estimates a wider than expected deficit for 2013 of some 7.2%, well above EU target levels. Thus, on both a fundamental and technical basis EURGBP looks weak."
"The pound is the second best performing G10 currency vs. the USD today after better than expected mortgage approval data for January. Mortgage approvals rose to nearly 50,000 at the start of the year, which is the fastest pace since 2007.
"After wavering a little last week on the back of some data misses, this was just the tonic that the GBP bulls needed. It has staged a recovery after losing ground in recent sessions to the EUR and GBP. EURGBP failed to break above a key resistance zone yesterday at 0.8277 –85 – the 61.8% retracement of this month’s sell off and the 50-day moving average - which capped EURGBP upside and reignited downward pressure on this pair.
"Momentum indicators also indicated the potential for further downside, after the daily MACD crossed below its zero line earlier today.
"European fundamentals are also not helping the situation for EURGBP, Italian retail sales were weaker than expected and Spain’s economy ministry announced that it estimates a wider than expected deficit for 2013 of some 7.2%, well above EU target levels. Thus, on both a fundamental and technical basis EURGBP looks weak."
12:12:Uptrend to resume
The Forex Trading University are advocating for further gains in GBP/USD:
"This pair produced a false break of key support at 1.6600 today. From here we see a high probability that this market will push higher as the uptrend resumes. There is even room for 1:3 risk / reward before price runs into 1.6800 if a buy-limit order is placed around the 50% retracement of the pin bar that formed today (for educational purposes only)."
"This pair produced a false break of key support at 1.6600 today. From here we see a high probability that this market will push higher as the uptrend resumes. There is even room for 1:3 risk / reward before price runs into 1.6800 if a buy-limit order is placed around the 50% retracement of the pin bar that formed today (for educational purposes only)."
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12:05: GBP demand strengthens agian
"The pair managed to touch levels below 1.6600, but we notice that its trading stably again above Linear Regression Indicators and a lower long shadow candlestick shows that the demand has strengthened again. We count on stability above 1.6600 today to suggest an attempt to the upside. But this attempt will not confirm bullishness unless it stabilised above 1.6740 as a start then breach 1.6785 and consolidate above it later." - ICN Financials latest forecast on the GBP/USD.
11:22: Trading the Verizon and Vodafone offers potential and risk
A further note from Lee; this time on the volatility expected in GBP/USD as the second tranche of demand is expected at today’s London Fix. Lee says:
"Those who try and buy too early risk getting stopped out by targeted pushes lower so the best policy in my opinion is to wait for any cynical dips (like we saw last night to 1.6580) and buy into weakness. Don’t be greedy, take the 80/100 pips on offer once the next batch of hopefuls start buying again- rinse and repeat.
"And most importantly, be sure to get out of the market around the Fix time as it could get very nasty indeed."
"Those who try and buy too early risk getting stopped out by targeted pushes lower so the best policy in my opinion is to wait for any cynical dips (like we saw last night to 1.6580) and buy into weakness. Don’t be greedy, take the 80/100 pips on offer once the next batch of hopefuls start buying again- rinse and repeat.
"And most importantly, be sure to get out of the market around the Fix time as it could get very nasty indeed."
11:19: GBP/AUD seen at its maximum
Interesting call from Sean Lee at FXWW on the GBP/AUD pair:
"Market is overall short of AUD and there will be heavy stops above 0.9100 in AUD/USD. Market is long of GBP and expecting some big buy flows today at the London Fix; what if the M&A flows don’t eventuate as expected and the AUD shorts keep getting squeezed?
"Could be a chance for a 24/48 hour play here in GBP/AUD. Edge into a short position looking for a 200 pip move lower later today to test 1.8200?
"Look for short-term resistance levels near 1.8470 to cap any intraday rallies."
"Market is overall short of AUD and there will be heavy stops above 0.9100 in AUD/USD. Market is long of GBP and expecting some big buy flows today at the London Fix; what if the M&A flows don’t eventuate as expected and the AUD shorts keep getting squeezed?
"Could be a chance for a 24/48 hour play here in GBP/AUD. Edge into a short position looking for a 200 pip move lower later today to test 1.8200?
"Look for short-term resistance levels near 1.8470 to cap any intraday rallies."
10:57: Is Vodafone driving GBP/USD demand today?
Why is the GBP stronger today? There is no obvious driver but there exists speculation over M&A flows being behind the move. Boris Schlossberg at BK Asset Management says:
"Cable was the only major to show some strength as the pair climbed to 1.6700 in morning London dealing. There was little fresh economic news to support the move, although the BBA mortgage approvals figure did climb to 50K from 47K eyed as the housing market clearly remains hot. However, the pop higher was driven by speculation of additional M&A flows from the Vodafone deal.
"On Friday cable plunged when rumours spread that most of the deal was hedged with options but today's action suggests that there may be some residual clearing demand left for cable and the unit has been strong on the crosses rising more than 100 points against all the commodity dollars and up about a 25 points versus the euro."
"Cable was the only major to show some strength as the pair climbed to 1.6700 in morning London dealing. There was little fresh economic news to support the move, although the BBA mortgage approvals figure did climb to 50K from 47K eyed as the housing market clearly remains hot. However, the pop higher was driven by speculation of additional M&A flows from the Vodafone deal.
"On Friday cable plunged when rumours spread that most of the deal was hedged with options but today's action suggests that there may be some residual clearing demand left for cable and the unit has been strong on the crosses rising more than 100 points against all the commodity dollars and up about a 25 points versus the euro."
10:02: Strong gains being seen in pound sterling (GBP) complex
The British pound is looking strong at mid-morning with broad-based gains confirming the underlying positive bias being maintained by markets towards the GBP. This was confirmed by the latest CFTC data that shows speculative market participants are holding more long positions than they are holding shorts, indeed GBP is the most positively held currency in the G10 at present.
09:51: Lloyds still favour GBP upside in medium term
"In the medium term we still favour GBP upside. Despite some softer domestic data releases last week. The underlying UK fundamentals remain solid. Furthermore potential for GBP inflows following the completion of the Vodafone-Verizon deal should provide decent support for GBP in the near term. BBA mortgage approvals released this morning will provide some indication of the overall mortgage activity ahead of the BoE official numbers due out next week however we doubt this will trigger much market reaction. GBP/USD looks likely to see decent support around the 1.6580 level." - Lloyds Bank.
09:30: Caution urged on GBP vs USD
The pound / dollar rate remains a tricky customer, as noted by the technical analysts at Gainsy:
"GBP/USD continued lower today but we may see a bottoming attempt on the hourly chart at 1.6638 so far. To the downside, we will keep focus in the short term at the 1.6600 barrier where 20 HMA and 55 4H-MA are coincided with Fib 38.2% of last rally between 1.6252-1.6823. A break here would suggest a short term topping, thus possible correction/consolidation toward 1.6450-1.6500 zone which recommends a short trade.
"To the upside, the current highs represent 50% Fib retracement of the long term drop between 2.0158 and 1.3503 (the last decade bottom), and actually the pair failed to overcome the broader resistance area (1.6750-1.700) since late 2008. The current rally is the third one that tests this major hurdle so we should be cautious as a third failure/reversal can't be ruled out as well."
"GBP/USD continued lower today but we may see a bottoming attempt on the hourly chart at 1.6638 so far. To the downside, we will keep focus in the short term at the 1.6600 barrier where 20 HMA and 55 4H-MA are coincided with Fib 38.2% of last rally between 1.6252-1.6823. A break here would suggest a short term topping, thus possible correction/consolidation toward 1.6450-1.6500 zone which recommends a short trade.
"To the upside, the current highs represent 50% Fib retracement of the long term drop between 2.0158 and 1.3503 (the last decade bottom), and actually the pair failed to overcome the broader resistance area (1.6750-1.700) since late 2008. The current rally is the third one that tests this major hurdle so we should be cautious as a third failure/reversal can't be ruled out as well."
09:03: Sterling euro slips into a period of calm
The below assessment of sterling euro has been provided by analyst Bill McNamara at Charles Stanley:
"The latest price action for the UK currency shows that it has slipped into a period of relative quiet, one consequence of which is that it has eased back from its latest highs relative to the euro (at 1.223 or so). However, the fact that it has managed to hold above its 50-day MA is a positive and although we could yet see a test of the short-term uptrend the outlook remains relatively benign."
"The latest price action for the UK currency shows that it has slipped into a period of relative quiet, one consequence of which is that it has eased back from its latest highs relative to the euro (at 1.223 or so). However, the fact that it has managed to hold above its 50-day MA is a positive and although we could yet see a test of the short-term uptrend the outlook remains relatively benign."
08:34: Bullish signals confirm pound euro exchange rate retains positive tone
Further confirmation that the 1.21 level could be a point below which the GBP/EUR is unwilling to go for now. At last night's close of 1.2127 we saw two Short-Term Bullish technical signals form - an Inside Bar and Price Crosses Moving Average (21-day). This tells us that technical pressures to the upside could be expected, however we doubt any major moves will transpire at this stage.
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08:31: Support at 1.21 proves true for GBP/EUR
The British pound to euro exchange rate has successfully held onto the 1.21 level; the past week's worth of FX trading has seen the GBP/EUR keen to test a break of this level, we look for the pair to remain supported as there are no data points of importance due today.
Highlights of the past 24 hours
The following highlights are to be found in Monday's coverage of the performance of the British pound (GBP).
- GBP/USD at 2.0?
- Order-driven and technical trading dominates
- Barclays warn GBP/USD could be overvalued
- Technical structures confirm a positive stance to GBP should be maintained
