British Pound Sterling on Friday 27 Sept: GBP In Fresh Gains, Nationwide House Prices Surge, US Dollar Weakness a Key Theme
The British pound sterling (Currency:GBP) is trading in bullish fashion on Friday morning following the release of a strong set of housing stats by the Nationwide. US dollar weakness and technical momentum trading will likely to dominate the outlook for the pound sterling and currency markets today.
Forex rates as of last update:
- The pound euro exchange rate is 0.06 pct higher at 1.1901.
- The pound dollar exchange rate is 0.47 pct higher at 1.6116.
- The pound Australian dollar exchange rate is 1 pct higher at 1.7400.
- The pound New Zealand dollar rate is 0.85 pct higher at 1.9733.
16:30: What to look out for in the week starting 30th September
On Monday at 09:30 we have Bank of England Mortgage Approvals data for August. Analysts are predicting a reading of 61.350K, up on last month's reading of 60.624K.
On Tuesday, the GBP/AUD watchers must be aware that the RBA interest rate decision could throw up a surprise interest rate cut which could send GBP/AUD higher.
At 09:28 on Tuesday the fun kicks off again with the first of the monthly PMI readings. The Manufacturing PMI is released and analysts are expecting a reading of 57.5.
On Wednesday at 09:28 PMI Construction is released. Analysts are bullish with expectations for a reading of 60.1. Up a point on last month.
Thursday at 09:28 is the all-important Services Sector PMI. Predictions are for a reading of 60.4. 0.1 lower than last month.
Friday is the big event from a global perspective with US Nonfarm Payrolls (Sep) being released at 13:30. Consensus is for a reading of 179K.
Also due for release at 13:30 is the unemployment rate predicted to come in at 7.3%.
15:42: The winners and losers of month-end FX rebalancing
Who will Septembers month-end rebalancing winners and losers be?
Yuki Sakasai at Barclays says:
"The Fed’s unexpected decision not to start tapering was also risk-supportive, although the effect was partly offset by uncertainty over the US fiscal issues. Bond prices saw a choppy price action driven by speculation on the Fed’s monetary policy outlook but ended the month rather flat, except for JGB, which underperformed in USD terms.
"The relative outperformance of US equities suggests international asset managers are likely underhedged on their USD exposures relative to other currencies. The model output shows a strong USD sell signal against GBP and CAD, and modest USD sell signal against JPY and AUD."
15:38: Sterling forecasts from Jyske Bank
A quick look at the forecasts for GBP just released by Denmark's Jyske Bank:
14:43: The big event on the horizon
kathy Lien at BK Asset Management says:
"With only 5 more days to go before a potential shutdown of the U.S. government, the clock is ticking and investors are getting nervous. The U.S. Senate is scheduled to vote on an emergency spending bill to finance the government around 12:30pm ET and the bill that includes the controversial health care law will then be passed to the House who meets over the weekend.
"House Republicans have vowed to change any bill that includes funding for Obamacare and will undoubtedly insert changes aimed at killing the plan. They will then pass the bill back to Senate who will only have 1 day to act before the October 1st deadline.
"As this deadline approaches investors are stepping up their sale of dollars on the growing concern that a government shutdown will undermine the quality of U.S. assets and lead to a retrenchment in U.S. growth."
13:02: GBP has over-reacted to Carney remarks AND much-ado about nothing on UK house price rises
Stephen Gallo at BMO Capital Markets sees an element of over-reaction by GBP to the Carney remarks. He also downplays the growing focus on house price rises:
"The strength in the GBP following Carney’s QE remarks and UK house price data for September seemed exaggerated. Since the July MPC meeting, not a single Committee member has voted for an additional round of QE.
"Moreover, when you strip out inflation and the impact of London prices, UK house prices aren’t really doing that much.
"They’re barely even rising faster than nominal incomes. The BoE is probably a good distance away from having to deal with problems here, but even if it weren’t, would interest rates be the tool it would use to deal with them? We’re not at all convinced the answer to this question is ‘yes’."
11:30: Food for thought on the "housing bubble"
Why are first time buyers getting the lions share of the blame?
I would like to see more attention focused on the upside pressures placed on house prices by second home buyers, buy-to-let investors and foreign buyers.
11:00: More on the Carney 'shock' to GBP
Boris Schlossberg at BK Asset Management on what has proven to be something of an eye opener in the currency markets:
"An early morning article in the Yorkshire Post caught currency traders off guard today sending pound soaring after it revealed comments by BOE chief Carney that he sees no need for further QE at this time. Mr. Carney's remarks were actually made yesterday in a meeting with businessmen at offices of a law firm and made their way to the paper today.
"The news, which was released in early pre-London market trade, spiked cable by nearly 100 points amidst low liquidity conditions, but the pair settled down after the initial shock and gave back most of its gains."
10:33: Is Sterling displaying fatigue?
Emmanuel Ng at OCBC Bank says sterling is likely to continue consolidating as it runs out of steamL
"GBP-USD may attempt to consolidate north of the 1.6000 area as we reiterate that markets may be displaying some fatigue with the stream of UK data releases portending a brighter outlook.
"Initial resistance is expected towards 1.6100 and then 1.6130 while a breakdown at 1.6000 may pave the way to 1.5960."
09:16: Carney interview also stokes Sterling
"The Pound has benefitted in early trading this morning, after Bank of England Governor Mark Carney gave an interview saying that the UK recovery had “strengthened and broadened”. In his view this means that, unless the economy falters, there will be no need to extend Quantitative Easing (QE) any further.
"QE has been one of the main factors hindering the Pound in recent years and an extension was seen as likely, so the news that the main decision maker is against this has given sterling a boost. The Pound rose around half a cent against the Euro and US Dollar at 6am today when the interview was published."
08:50: US Dollar weakness continues to be dominant currency market theme
An under pressure US dollar continues to be of primary concern to currency markets.
"The market focus remains on US as the concerns on debt ceiling grow higher walking through the deadline. Reported by Washington post yesterday, the rejection of the short-term spending plan was rejected by top House Republicans, increasing the likelihood of a government shutdown. USD lost against the majority of its G10 peers over the past 24 hours of trading." -Ipek Ozkardeskaya at Swissquote Bank.
08:35: House price rises underpin a bullish pound sterling
The only data release of any consequence to the UK currency has been released by the Nationwide.
Nationwide Housing Prices n.s.a (YoY) (Sep): An increase of 5% was recorded, well ahead of consensus forecasts for 4.5%. Last month's reading was at 3.5%.
Nationwide Housing Prices s.a (MoM) (Sep): On a monthly basis prices increased 0.9%, analysts had forecast 0.5%. The reading was above last month's 0.7%.
Reaction: 'Surprisingly quick' acceleration in house prices
North-South divide in house prices.