Pound Sterling Live 1/11: GBP/EUR sees best gains since April but GBP/USD upside put on hold
The British pound sterling (Currency:GBP) has taken full advantage of the broad-based Euro weakness to break back into the 1.18's. However, whether the GBP can advance yet further will depend on the outcome of today's Manufacturing PMI release, due at 09:30. Elsewhere, watch out for the strengthening dollar!
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Exchange rates at last update:
- The pound euro exchange rate is 0.14 pct higher at 1.1824.
- The pound dollar exchange rate is 0.25 pct lower at 1.6000.
- The pound Australian dollar is 0.4 pct lower at 1.6890.
- The pound New Zealand dollar rate is 0.53 pct higher at 1.9500.
Please note: All quotes here taken from the wholesale markets; your bank will subtract a discretionary spread when passing on their rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.
15:10: Could a tax on foreign property buyers hurt the pound sterling?
The Chancellor George Osborne is considering introducing taxes to target foreign buyers of UK property with the view to cooling an overheating market.
BUT - there could be unforeseen consequences, as told by Geoffrey Yu and Gareth Berry at UBS:
"The UK’s capital account remains in rude health and on Thursday UNCTAD announced that the country is now the top recipient of foreign direct investment globally.
"Such flows are essential for the UK to continue financing one of the worst current account positions in the EU, and current trends suggest that such flows are largely detached from economic fundamentals: UNCTAD’s figures pertain to H1 but the UK’s economic outperformance has only taken hold since H2. Current flows are also becoming less sensitive to valuations reflected in sterling performance.
"As such, the decline in gilt buying is not a problem as foreign investors are actually increasing investment into other sectors of the UK economy and demand is actually increasing. Many countries would envy these trends, leading us to question why, as announced on Thursday, the government is looking into potentially introducing excise on certain forms of foreign investment in the upcoming Autumn Statement.
"Without taking a view on the motivation behind the proposals, there is a risk that the ‘deterred flows’ is simply sent elsewhere rather than into an alternative UK asset, with serious consequences for the country’s balance of payments and the currency."
14:10: Where is euro/Pound support?
"The pair extended the sharp selloff, breaking below the ascending support for the latest bullish wave, accordingly, further downside remains the most likely scenario, where initial support resides at 0.8425 level," warns a technical forecast note from ICN Financial.
13:56: Euro/Pound rate to remain under pressure
"Attention will now turn to next week’s ECB meeting with increasing expectations that the ECB might announce an easing of policy. Therefore, we might see sterling recover from recent weakness. We closely watch for technical signals that the uptrend in EUR/GBP is finished," says Piet Lammens at KBC Markets.
13:41: Have no fear, GBP will remain supported
The pound dollar exchange rate is having a rough day of it - to be fair so are most currencies when it comes to squaring up against the USD.
Omer Esiner at Commonwealth Foreign Exchange does believe that GBP will be underpinned going forward:
"On balance, the U.K. economy is likely to outperform the euro zone and the steady outlook for the Bank of England should ultimately keep the pound underpinned. Still, with investors buying back the badly beaten greenback, momentum could see the pound shed more of its recent gains in the days ahead."
12:12: Sentiment it is a-changin’
We take a look at the euro's woes in our latest published piece. As Kasper Kirkegaard at Danske Bank notes:
"Sentiment it is a-changin’. Not least on the currency market!
"In less than one week the market has gone from being fairly bullish on the euro for the short term to unwinding long positions from stretched levels (at least that is what the spot reaction indicates)."
11:55: GBP in late morning slump
The British pound has fallen back as we head into the afternoon session. The rate is now half a percent down against the dollar and has erased all today's gains against the euro.
10:40: Why traders didn't sell GBP after today's Manufacturing PMI release
Manufacturing PMI may have disappointed but GBP remains firm. Why?
Boris Schlossberg at BK Asset Management points out that the data was still undoubtedly strong:
"In UK the PMI Manufacturing came in at 56 versus 56.3 which was a little worse than expected, but the underlying data showed strength. Export orders were the highest since February 2011, purchase price inflation eased and domestic order demand grew as well."
10:20: GBP/USD declines to 1.5950 on the cards
Emmanuel Ng at OCBC Bank says 1.5950 should be observed:
"Pending further cues from the dollar and the EUR, expect the GBP-USD to continue to mull the 1.6000 support and we would prefer to fade any rallies towards 1.6050 while any failure at 1.6000 may pave the way to 1.5950."
09:31: Muted reaction to PMI data
The data may have disapointed, but not by enough to really trigger any market selling. GBP is steady.
09:30: Manufacturing PMI below expectations
UK Manufacturing PMI (October) has disappointed to the downside. It came in at 56.0 vs 56.4 expected and 56.7 previously.
09:24: The possible reactions to Manufacturing PMI
This post comes really close to the actual release, nevertheless, here it is. This from kathy Lien at BK Asset Management:
"Economists are looking for manufacturing sector activity to slow for the second month in a row and based on the sharp drop in the CBI index, we agree that manufacturing activity weakened further in October. Back to back declines in PMI could be just what investors are waiting for to take the GBP/USD below 1.60. A strong number would be a complete surprise and could compound the losses for EUR/GBP."
09:11: Why is the US dollar stronger?
"We would caution USD bears that with both the WSJ and FT out with articles suggesting that a December taper is a real possibility there is some added upside risk to the USD, particularly since the market is now positioned for a H1 2014 taper.
"The FOMC statement signalled that the Fed sees financial conditions having eased, a vague improvement in the labour market and noted a softening in the housing market. This was enough to generate a brief USD rally, which subsequently has been erased, with the exception of EUR."
08:50: Steepest losses since April for EUR/GBP
Further gains for sterling over the euro this morning:
"Over the past 48 hours we have seen very little movement in the GBP/USD. All of the action was concentrated in EUR/GBP, which experienced its steepest losses since April. The stability of the GBP/USD indicates that the 1.15% decline in the euro cross was triggered primarily by euro weakness," says Kathy Lien at BK Asset Management.
08:35: GBP/USD upside put on hold
The US dollar is powering higher on Friday morning; as such calls for further upside on GBP/USD will be pared back.
Lloyds Bank Research:
"While we still favour GBP/USD to the upside, we think the market will likely need either, better-than-expected UK data or a broad USD sell-off to push GBP/USD higher."
Regarding the euro pound exchange rate Lloyds say:
"Nevertheless, we expect EUR/GBP to remain biased to the downside on continued EUR under-performance."
08:30: Manufacturing PMI of interest for sterling today
Today's manufacturing PMI should see attract some interest amongst currency traders.
"The market is expecting a further mild softening in manufacturing sentiment, although, even a modest decline in the index would still suggest robust manufacturing growth of around 1% on the quarter so even a reading close to expectations should still be supportive for GBP. However, we doubt it will be sufficient to push GBP/USD much higher." - Lloyds Bank Research.