GBP Sterling Exchange Rates Settle Lower, No CPI Boost
- £ vs Euro:1.2062
- £ vs Dollar:1.2579
- £ vs Australian Dollar:2.0236
- £ vs Canadian Dollar:1.8125
- £ vs New Zealand Dollar:2.2331
- £ vs Rand:23.5163
Wednesday morning trade
Wednesday sees more of the same - a weak GBP unable to find any friends this March. However, we believe some could be entering the market to pick up the currency which is now cheaper. Follow our views and all the latest news here.
16:14: GBP-CAD looking perilously close to support
Shaun Osborne at TD Securities updates on the GBP-CAD:
"GBPCAD has been struggling against resistance at 1.8645 over the past two months, leaving the GBP looking perilously close to support at 1.8396. We are still more inclined view the outlook here as bullish overall—the strong bull trend here remains deeply entrenched on the longer-term charts, at least.
"And the daily set up remains potentially bullish—the wedge pattern the market is confined to is tightening and usually resolves in the direction of the underlying trend. But the time for a break out is now, otherwise the formation will start to look too mature and that may mean more sideways range trading and pressure on support just under 1.84. That might leave the GBP exposed to a test of 1.8284, the neckline of a quadruple top."
15:50: EUR punishment continues
The GBP-EUR continues to power ahead. The rate is half a percent higher at 1.1982. Those Weidmann comments (See earlier entry) are still reverberating around the markets.
14:40: Is the current bullish bias about to be negated?
Luc Luyet at MIG Bank comments on the big move that could be about to shape up on the GBP-USD:
"GBP/USD is challenging the support implied by its rising channel. Hourly resistances are given by 1.6568 and the declining channel (around 1.6591). Supports can be found at 1.6460 and 1.6252 (05/02/2014 low).
"In the longer term, a break to the downside out of the rising channel would negate the current bullish bias implied by the break of the resistance at 1.6668 (24/01/2014 high). A strong horizontal support stands at 1.6220 (17/12/2013 low)."
13:51: Why is the euro struggling?
The pound has made some strong advances against the EUR today. Why?
Jens Weidmann, the head of Germany's Bundesbank, has said the ECB could embark on a radical quantitative easing programme to boost the eurozone and ward off the threat of deflation.
Weidmann today said:
"The unconventional measures under consideration are largely uncharted territory. This means that we need a discussion about their effectiveness and also about their costs and side-effects.
"This does not mean that a QE programme is generally out of the question but we have to ensure that the prohibition of monetary financing is respected."
Commentators say Weidmann's words mark a significant softening of Germany's stance to QE. With regards to currencies, simply put currency strength and QE don't sit well together!
12:21: Another move to the downside ahead?
Craig Erlam at Alpari UK predicts the GBP-USD is getting set for a fresh leg lower:
"We had a bit of a correction in this pair yesterday but it ran into resistance around the 50 fib level, 5 February lows to 17 February highs, before erasing most of the days gains before the end of the session. This suggests to me that the correction is already over and we may see another move to the downside in the coming days."
12:11: EUR-GBP slumps
The euro pound exchange rate has dipped 0.25 pct by mid-day having reached 0.8367. However, analysts at ICN Financial warn that the outlook still favours the EUR:
"The outlook is positive for EURGBP above 0.8285 and the intraday risk-limit is below 0.8160
"The pair has been trading positively since yesterday and approaching the critical resistance at 0.8410 that should be breached to confirm the upside move over intraday and short term basis. The wave finds support from the MA 50 & 100 targeting 0.8500 then 0.8560. Stochastic offers positive signals supporting the upside move that remains valid with stability above 0.8325-0.8285."
11:43: Trend on EUR-GBP comfortably bullish
More from Swissquote, this time on EUR-GBP:
EUR-GBP advanced to 0.83935 (a stone’s throw higher than our Fibonacci resistance of 0.83915) and sold-off on UK data. The trend momentum is comfortably bullish, while offers remain solid pre-0.83915/0.84000. The next key technical level stands at 0.84201 (200-dma).
11:11: UBS are neutral on Cable
"Important support at 1.6470 was tested, a close below would be negative as it would confirm MACD’s settlement below its zero line, exposing critical support at 1.6339. Resistance is at 1.6599 ahead of 1.6684." - UBS.
11:02: Still a distinct lack of enthusiasm for GBP
"GBPUSD advanced to 1.6510, lack of further enthusiasm pulled the GBPUSD back below 1.6500. Moving forward, the GBP-selling pressures should remain as soft inflation data is supportive of BoE’s forward guidance on low interest rates. Due on Thursday, the UK retail sales are expected to witness of further slowdown in February." - Ipek Ozkardeskaya at Swissquote Bank.
10:50: Inflation to head yet lower?
What is good for the UK consumer is not necessarily good for the currency:
"UK inflation fell to 1.7% in line with market forecasts, hitting its lowest levels since October 2009. Inflation is now moving away from the Bank of England’s 2% target, which is something the market had been expecting in the near term. One of the great positives from this fall in inflation is the fact the gap between growth in earnings and inflation is now at its narrowest since April 2010. This had been a significant concern over the past two years, reducing the capacity of consumers. The narrowing of this gap is extremely welcome and as the UK economy continues to gather pace, we could well see this gap narrow even further." - Joshua Raymond at City Index.
10:26: Food for thought
Dennis de Jong, managing director at UFXMarkets, comments on today's UK Inflation numbers:
"Hot on the heels of some positive economic rhetoric during last week’s Budget, consumers have received a boost to the cost of living with inflation hitting another four-year low.
"Lower than predicted unemployment may be threatening to raise interest rates but today’s CPI numbers will give the Bank of England further food for thought as they continue to plot a path to a stable and flourishing UK economy."
09:30: Inflation higher, sterling higher
A boost for the UK£ at 09:30 with the release of inflation data.
Core Consumer Price Index (YoY) (Feb) comes in at 1.7%, analysts had predicted 1.6%. This higher level is telling markets the Bank of England can't be too complacent when it comes to leaving interest rates low.
We are seeing the pound improve.
08:40: For Cable, the big matters increasingly matter
Sean Lee at FXWW on the big numbers to look out for with regards to sterling dollar:
"Cable has never been the most technically accurate currency pair, probably because it’s been in one big range trading pattern for the last 30 years! Nevertheless, and especially with the increasing numbers of technically-based retail traders coming into the market, the big levels are still important.
"The 61.8% retracement of the 1.6250/1.6825 rally comes in at 1.6470 and that level has held on the first few tries. There will certainly be tight stops below 1.6450 but I still like the buy-dip play.
"Buy intraday at 1.6470 and medium-term players can buy any dips towards 1.6375 in my opinion."
08:22: Spreads narrow, this should support pound dollar
"The slight narrowing of UK/US OIS spreads beyond 1 year seen of late consequently may be reversed soon, supporting GBP/USD. But for today there is still a little downside for GBP/USD and while the CPI data shouldn’t provide any new reason to sell, it may lead to a modest dip below the initial support at 1.6470." - Lloyds Bank.
08:20: Do today's inflation numbers really matter?
Not really argue Lloyds Bank Research:
"(Today's CPI figures are) likely to be the low of the cycle as base effects in the oil price are largely responsible for the drop, so the impact on policy is likely to be minimal. As we have noted before, declines in inflation related to lower import prices should not typically be seen as significant for policy – if anything these are positive for growth and may mean higher inflation in the future."
08:00: The key figures to watch today
GBP will feel the heat at 09:30 with the release of Core Consumer Price Index (YoY) (Feb) which is predicted to read at 1.6%. Anything less will be negative for trade and anything higher will likely firm the currency up.
Consumer Price Index (YoY) (Feb) is predicted to come in at 1.7%, down from the previous month's 1.69%.
Past 24 hours: Sterling stuck ahead of inflation data
The pound dollar exchange rate found itself caught in a tight range on Monday the 24th of March with traders unwilling to extend themselves ahead of this week's data.
"Sterling is currently stuck in a ~50 bps range, with the top of the range being paid after better-than-forecast French manufacturing PMI data (51.9 vs. 49.8), but then it slid nearly half a cent on worse-than-forecast German manufacturing PMI data (53.8 vs. 54.7). Traders will be paying attention to the U.K.’s consumer price index (CPI) report on Tuesday morning, retail sales on Thursday, and current account data on Friday." - Jean-Pierre Doré at Western Union.
