British Pound (GBP) LIVE: Sterling Powers Higher as Bank of England Tightens Policy
The British pound sterling (GBP) remains well bid on Thursday morning with some interesting price action being seen against the New Zealand and US dollars in particular. We have some secondary data from the Bank of England attracting some interest today, however it will be the technical levels on the charts and month end rebalancing that will be of more importance for GBP.
Today's exchange rates
- The pound to euro exchange rate (GBP/EUR): 0.18 pct higher @ 1.12017. We are still seeing rejections below 1.2.
- The pound to dollar exchange rate (GBP/USD): 0.3 pct up @ 1.6330. No such problems with resistance zones for the Cable.
- The pound to Australian dollar rate (GBP/AUD): 0.41 pct down @ 1.7868. AUD making a broad-based relief rally after a rotten week.
- The pound to New Zealand dollar rate (GBP/NZD): 0.1 pct higher @ 2.000.Back above 2!.
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14:30: A warning to GBP bulls
Camilla Sutton at Scotiabank warns that the GBP rally's foundations could be shakier than many would believe:
"Yesterday’s detailed Q3 GDP release highlighted that it was the consumer that supported Q3 growth; while exports and business investment were notably weak.
"We see this as a warning to GBP bulls, particularly as it warns that there is a lot of good news priced in and not a lot priced in for disappointing growth."
Regarding the outlook for GBP/USD Sutton says:
"As spot rallies to a new high the MACD has failed to do so; warning of potential diverging pressures on the currency. We see better risk reward elsewhere."
13:02: What the Bank of England did today was "absolutely huge"
Stephen Gallo at BMO Captital Markets tells us why the today's events announced by the Bank of England and UK Treasury are incredibly important for the British pound sterling (GBP). Read what he said here.
12:35: Upward pressure on GBP/EUR building
A sustained break above the 1.2 level in GBP/EUR continues to look more likely thanks to the recent supportive pressure we have seen in the 1.19's.
12:00: Why has sterling risen today?
FX Market Alerts tell us:
"Sterling gets a lift from news that the BoE plan to scrap the incentives scheme to boost mortgage lending, which may seem a little counterintuitive, but which is seen to be 'net hawkish' in terms of interest rate/money supply.
"Cable is moving back towards the session highs, which topped out at 1.6345, with the target of 1.6380 from Jan very much on the cards.
"EUR/GBP has been hit lower accordingly though we see bids coming in just ahead of the lows seen in front of .8315."
11:32: EUR/GBP to target 0.83
"EURGBP traded lower through New York & Asia before rebounding from 0.83200 on the EUR-leg. MACD will continue pointing downwards for a daily close below 0.8385. Although we start seeing weakness in downside momentum, we keep our target at 0.8300." - Ipek Ozkardeskaya at Swissquote Research.
(0.83 = 1.2048 in GBP/EUR terms)
11:17: Resistance ahead for Cable
Luc Luyet at MIG Bank warns that for GBP/USD a strong resistance area stands between 1.6302 and 1.6381. Support is seen at 1.6258.
"In the medium-term, the break to the upside of the multi-month consolidation is positive. However, monitor the test of the strong resistances around 1.6381 (02/01/2013 high), given the deep overbought conditions."
10:41: As Carney speaks, fresh gains for sterling, above 1.2 vs EUR
- The British pound is powering higher as Mark Carney talks. Breaks 1.2 vs the EUR.
- UK removes bank incentives to lend mortgages, but retains SME lending incentives. Housing stocks plummet.
- Also note UK borrowing rates have fallen: United Kingdom 30-y Bond Auction declines to 3.61% from 3.74%.
- Chancellor & Governor of Bank of England will re-focus Funding for Lending Scheme to support business lending in 2014.
10:08: Citi bullish on GBP, 1.75 in a years time
According to the latest Citi FX forecast, major currencies may move in different ways. Citi analysts are bullish on European currencies such the EUR and the GBP, while commodity currencies and the JPY may have downside risk.
The 6-12m forecast for the GBP/EUR exchange rate is at 1.75. The 3m forecast is at 1.65.
So if Citi are right then there is more to come from Cable.
In addition, Citi analysts revised down the AUD forecast. The AUD may be undermined as the RBA may delay the rate hikes until 2015 1Q and the bank said to have an “open-mind” on intervention. In the medium and long term, AUD/USD may test lower to 0.88-0.91.
09:26: Carney speech ahead
A reminder that at 10:30 Bank of England Governor Carney will be speaking as he delivers the Financial Stability Report. The Governor always demands attention from financial markets so look out for some potential volatility in GBP at this time.
09:06: Cable tears higher
The pound vs US dollar exchange rate is on the front foot. As Lloyds note:
"GBP/USD finally broke through the 1.6260 October high after several attempts over the past month. We think bias remains to the upside in GBP/USD further supported by month-end re-balancing flows. We target a test of the 1.6381 year high."
09:00: Ahead, Bank of England financial stability report
This morning the Bank releases the latest Financial Stability Report.
"The report will be of interest after the adoption of forward guidance by the MPC, with financial stability being a key metric for one of the 'knock outs'. The market will look closely for any comments the Bank makes on the housing market and any risks to financial stability amid continued signs of house price strength. We doubt the Committee will be too concerned at present, reiterating they will closely monitor developments, and we therefore expect a relatively muted market response." - Lloyds Bank Research.
08:30: Pound vs New Zealand dollar back above 2, but for how long?
The GBP/NZD exchange rate is back above the 2 NZD level. As can be seen by the graph, the GBP has failed here quite regularly in the past.
We have a feeling that this is likely. Only the prospect of strong PMI data in early December could really propel the GBP/NZD higher.
What the below also shows us is that when rejected the pullback can be rather deep.
08:27: GBP snapshot
Mark Lee at FXWW gives us a snapshot of GBP this morning:
GBP/AUD has accelerated higher again and it’s next technical target is weekly highs just below 1.8500;
EUR/GBP has edged a bit lower despite usual end-of-month central bank demand;
- Cable continues to break technical resistance levels and it seems that the market is finally starting to get the picture, this pair is headed higher.