Sterling Live on Tuesday 1st Oct: Euro to Pound exchange rate outlook ultimately remains bearish, Manufacturing PMI dominates today's agenda

The British pound sterling (Currency:GBP) is predicted to stay on the front foot against the Euro by TD Securities. The key drivers for the Pound Sterling today will be data released by Markit at 09:28 while the background of a US fiscal crisis will ultimately drive financial markets today.

Forex rates as of last update:

• The pound euro exchange rate is 0.12 pct higher than seen at last night's close at 1.1981.  
• The pound dollar exchange rate is 0.13 pct higher at 1.6207.
• The pound Australian dollar exchange rate is 0.64 pct lower at 1.7263.
• The pound New Zealand dollar rate is 0.78 pct higher at 1.9852.

15:47: Trader indecision sees GBP/USD rally stall

Matt Weller on the stalling in the GBP vs USD rally:

"At this point, the momentum remains strongly to the topside, though a recent Doji candle on the 4hr chart indicates that the rally could be due for a pause in the lower 1.6200s in today’s North American trade."

A Doji candle is formed when rates trade higher and lower within a given timeframe, but close in the middle of the range, near the open. Dojis suggest indecision in the market.

15:20: GBP/USD could be nearing the limit

Interesting comment from the team at FX Market Alerts concerning the outlook for the pound / dollar rate:

"Early rise has stalled out to cover a 1.6215-50 range, maintaining a short-term separation higher from the Monday & the overnight range highs at 1.6200, keeping the market short-term firm & facing 1.63."

Analysts point that 1.63 is however the longer-term downtrend which coincides with last year's high.

"We'd expect to see 1.63 sold soon if touched, for return back through 1.6150," say FX Market Alerts. Read our latest piece concerning the outlook for the US dollar - USD strength beckons?

13:42: Euro predicted to remain under pressure against the British pound

Another pro-Sterling GBP/EUR forecast, this time by Ilya Spivak, Currency Strategist, at DailyFX:

"We continue tohold short after prices broke support at 0.8358 (38.2% Fib). Sellers now aim to challenge 0.8322 (50% Fib); below that targets 0.8287 (61.8% Fib). Back above 0.8358 targets resistance at 0.8401 (23.6% Fib, falling channel top)."

11:50: Why is the pound lower against the Australian dollar today?

The GBP/AUD exchange rate is one of the notable movers; indeed widespread Australian dollar strength can be noted.

The reason lies with the Reserve Bank of Australia's decision on interest rates and policy, best summed up as thus:

"NO change in the cash rate, no sign that a cut is likely soon, but no sign that a cut later on has been ruled out." Garry Shilson-Josling, AAP. More here.

11:21: The tide is turning, a US dollar comeback beckons

For those holding out for yet higher levels in the pound vs US dollar exchange rate, beware.

We hear from the foreign exchange team at Deutsche Bank, lead by Bilal Hafeez, who says the tide is turning for the US dollar:

"The continued rise in US yields in the face of mixed data in recent months suggests that some form of normalisation in yields may be occurring.

"The fact that yields were much higher before 2011 when the US economy was much weaker adds to the case, and suggests that as long as the Fed does not engage in additional QE, the trend has now turned. This is important for the dollar, which has been held back by the trend decline in real yields since 2008. With that trend turning, USD should be more able to appreciate against both G10 and EM."

We will be publishing the latest Deutsche Bank forex forecasts later on today.

09:56: Muted response to today's Manufacturing PMI

Not much change to the value of the British pound in the wake of today's Manufacturing PMI data release. Were markets secretly expecting a slowdown?

09:28: Manufacturing PMI released

Actual reading = 56.7
Consensus forecast = 57.3.
Last month = 57.2.

So, still a positive reading indicating growth, but below expectations.

08:46: No US non-farm payrolls this week?! + Fears emerge over Italian bond markets as political crisis grinds on

Jeremy Cook at WorldFirst on the implications of the US shutdown. In addition - real troubles loom concerning the Italian political situation. A must watch:

08:12: The key driver for Sterling = Manufacturing PMI due @09:28

The Manufacturing Purchasing Managers Index (PMI) is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics today at 09:28.

Strong readings in this series have over the course of summer 2013 been a key catalyst behind the GBP recovery.

Analysts are today predicting a reading of 57.3, a slight improvement on last month's 57.2. A figure either side will move Sterling.

08:10: Outlook for euro to pound exchange rate - it is evenly matched… for now

Shaun Osborne at TD Securities says the euro to pound exchange rate is stuck in something of a ruck, but ultimately Sterling will win out:
"EUR/GBP has seen quite a fight between bull and bear pressures evolve over the past week. The initial break below support around the 0.84 level was reversed strongly last week (bullish outside weekly range), suggesting the risk of a big reversal in the recent sell-off in the cross.

"But the GBP has regained the upper hand this week and weekly patterns indicate a “reversal of the reversal” has played out—this week’s heavy net loss on the week more than offsets last week’s rally (forming a bearish “engulfing line” on the weekly can-dle chart. We think the broader topping/reversal indications from recent weeks (major double top breakdown, targets a drop to the low 0.80s) remain intact. We remain bearish."

08:04: US fiscal crisis = GBP positive

With the US fiscal showdown grinding on it is worth remembering that the British pound remains well placed owing to its safe-haven function.

We recall the entry made at 15:22 yesterday from Omer Esiner at Commonwealth Foreign Exchange who said:

"The British pound rose to a nine-month trade weighted high over the weekend as America and Italy’s battle for the title of most dysfunctional government in the industrialised world benefited sterling. The safe-haven flows out of the euro and the dollar added to the pound’s already upbeat tone."