British Pound Sterling Live: GBP Forecasted to Touch 1.57 vs US Dollar BUT the BoE Looms Large
The British Pound Sterling (Currency:GBP) remains firm following a non-event Bank of England MPC decision. Technical forecasts continue to point to the possibility of further gains for the UK currency but there is a growing sense that the profit takers will soon step in.
Above: The Bank of England is today's main event risk for the British Pound Sterling. Any overtly dovish commentary will surely bring a halt to recent gains.
Highlights:
@ 12:04: Sterling in positive reaction to MPC Minutes
@ 15:38: Why is the US Dollar so strong?
The State of Sterling Today (As of Last Posting):
The Pound to Euro exchange rate is 0.44 pct higher on a daily basis at 1.1888.
The Pound to US Dollar exchange rate is 0.1 pct lower at 1.5612.
The Pound to Australian Dollar exchange rate is 0.29 pct higher at 1.7086.
The Pound to New Zealand Dollar exchange rate is 0.11 pct higher at 1.9793.
The Pound to South African Rand rate is 0.03 pct lower at 16.0312.
Please Note: These are wholesale quotes; your bank will levy a discretionary spread when passing their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please learn more here, or use our custom wholesale vs retail currency converter.
16:30: Currency markets turn their eyes to Friday's big data event
Ishaq Siddiqi at ETX Capital gives us a brief preview ahead of tomorrow's big currency market driver:
"Across in the States, ADP data on US jobs fell short of expectations – ADP says 176k jobs were created by the US last month but expectations were for around 184,000.
"Meanwhile, US jobless claims fell more than expected – mixed signals here which do little to give us a better idea of where tomorrow’s payrolls will come in.
"Expectations are still for an increase of 170k to 200k jobs by the US last month – the key of course will be the drop in the unemployment rate which is at 7.4% currently. A drop to 7.2% will most certainly hasten the Fed’s resolve to taper asset purchases at this month’s policy meeting."
15:46: GBP a safe haven to middle-east tensions
Lloyds Bank Research on why Sterling is likely to maintain a strong bid:
UK data has been almost universally strong in recent months, and on the face of it this provides a reason to be positive on GBP.
"The combination of decent growth, a small oil import bill and a relatively flat front end to the UK curve (compared to the US and Eurozone – see chart) suggests that sterling will re main well supported and should be a good safe haven in a period of uncertainty in the Middle East."
15:38: Why is the US Dollar so strong?
Kathy Lien tells us why the US Dollar is today's star currency:
"Investors are snapping up U.S. dollars this morning as stronger non-manufacturing ISM and jobless claims fuel expectations for a solid non-farm payrolls report. EUR/USD dropped to a fresh 6 week low while USD/JPY traded above 100 for the first time since July 25th.
"Demand for the greenback is also supported by U.S. 10 year bond yields, which are also closing in on 3%. Service sector activity expanded at its fastest pace since January 2006 and more importantly, the employment component of the report rose to its highest level in 6 months."
15:32: Silence might be golden. It is not policy-neutral
RBS analyst Ross Walker has given his assessment of today's lack of guidance from the Bank of England:
"The core purpose of forward guidance was to provide greater clarity about the MPC's reaction function.
"In this respect the new policy framework is not functioning as effectively as it should be ever higher market interest rates challenge the Bank's assessment of the outlook.
"Either the MPC needs to confront these market moves by stating that rate expectations are unwarranted -and thus guide rates lower -or it needs to acknowledge that the improving fundamentals have changed the position vis--vis the July and August meetings.
"Silence might be golden. It is not policy-neutral."
14:48: GBP/USD rally tipped to continue
Matt Weller at GFT says the British Pound is still likely to grind higher:
"The GBP/USD traced out a similar path to the EUR/USD, leaving rates pressing against multi-week highs as we go to press.
"Yesterday’s breakout triggered a buy trade, leaving us long from 1.5615. Previous resistance at 1.5600 then came in to provide support for the pair and rates have now rallied into the mid-1.5600s.
"With a new higher high on the 4hr chart, we will look to adjust the stop loss up from the original 1.5575 up to 1.5587 (just under today’s low). Meanwhile, we will continue to watch for a potential continuation up to the target at 1.5690 next."
14:05: Euro under pressure, GBP/EUR to test 1.19
The Euro is under pressure this afternoon after ECB President Draghi says that ECB discussed a rate cut at today's meeting.
GBP/EUR advances towards 1.19.
12:04: Tentative boost for GBP following Bank of England release
Minutes after an unchanged Bank of England MPC decision we are starting to see GBP advance.
Rates and policy are left unchanged.
IMPORTANTLY no bearish guidance attached to the release.
UKForex say: "No extraordinary statement with the BOE decision."
Forex.com say: "No statement from the BOE, GBP shoots higher and EURGBP reverses lower."
11:05: Remember, volatility will likely pick up
Ipek Ozkardeskaya at Swssquote Research reminds us that volatility will pick up at mid-day:
"Ahead of us, the BoE and ECB policy verdicts will be the key events of the day. The respective policy rates and targets are expected to remain unchanged in both meetings; however the accompanying statements are expected to trigger volatility in EUR and GBP."
11:00: EUR/GBP predicted to remain top heavy
Fresh forecasts from Emmanuel Ng at OCBC Bank:
"The GBP-USD climbed another rung in the wake of the better than expected Aug services PMI reading. Pending the BOE today, the pair may remain somewhat supported with key support expected towards the 200-day MA (1.5498). On other fronts, expect the EUR-GBP to remain top heavy with the cross already having violated its 200-day MA (0.8486)."
08:45: UBS remain bullish on GBP
Another forecast for GBP/USD, this time from Gareth Berry at UBS:
"The recent upside opens the doors to test the strong resistance range at 1.5718/50. Support is at 1.5522 ahead of 1.5423."
Regarding EUR/GBP: "The cross is under selling pressure and all evidence suggests more weakness to test the important support at 0.8398. Resistance is at 0.8540."
08:32: British Pound forecasted higher versus US Dollar
More gains for the GBP/USD are forecasted at Citibank who today say:
"GBP rose above 1.56 as U.K. Service PMI rose from 60.2 to 60.5 in Aug, topped estimates.
"GBP Outlook: BOE may not expand its QE program, which could improve GBP’s sentiment. Technically, GBP/USD will likely climb to 1.5750-1.5829, with support at 1.5430."
08:26: Lloyds Bank Research see a chance of accompanying statement from MPC
Lloyds Bank on the 12:00 monetary policy release at the Bank of England which will be keenly watched by Sterling traders:
"The Bank of England is unlikely to shift its policy stance, but we see a good chance of an accompanying statement to help reinforce its forward guidance."
08:25: ECB decision also due
With regards to the Pound Sterling to Euro exchange rate we have the ECB as a potential driver today.
Lloyds Bank say:
"The ECB policy decision is due at 12.45. Again we expect no policy change and the press conference is unlikely to signal any shift in overall stance. However, the ECB will publish its quarterly macroeconomic forecasts and attention will be focused on its communication strategy, including the possibility of meeting minutes in the future."
08:15: Bank of England MPC and uncertainty about guidance looms
Today at 12:00 we get the next big test for the British Pound.
The Bank of England MPC announce the decision of their latest monetary policy meeting.
Don't expect any changes.
The wildcard however is the possibility of forward guidance.
Will the MPC try and talk interest rate expectations lower? If so this would be a negative for the Pound Sterling.
Unfortunately the exact nature of any guidance is a complete unknown; and anything that raises eyebrows will shock Sterling higher or lower.