British Pound (GBP) 29/01: GBP Up vs NZ Dollar Post-RBNZ, FOMC Deliver Unanimous Decision
- Last Updated: 03 April 2014
Updated: The GBP exchange rate complex has come under pressure once 
more at the start of April with the entire Markit PMI series missing the mark. However, many analysts continue to consider the latest price action as being representative of consolidative price action.
April will be pivotal for the UK unit - can the uptrend reassert itself or will we continue to see more of the same?
Keep in touch with our Live Coverage Here. For the archived material for the day in question please scroll through please scroll down.
By Rob Samson
Up to date British pound (GBP) exchange ratesPound sterling to euro exchange rate: 1.2123. Pound sterling to US dollar exchange rate: 1.6561. Pound sterling to Australian dollar exchange rate: 1.8950. Pound sterling to Canadian dollar rate: 1.8506. Pound sterling to New Zealand dollar exchange rate: 2.0166. BE AWARE: All the above quotes are taken from the wholesale inter-bank markets. Your bank will affix a spread to the rate at their discretion when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.22:30: British pound shoots higher vs New Zealand dollar
The pound sterling has shot higher against the New Zealand dollar despite the Reserve Bank of New Zealand's promise to begin raising interest rates soon from the current 2.5%. This tells us markets were confident of a rate hike. The only kiwi negative comment made by the Central Bank Governor Wheeler was his concern about the strong currency.22:00: Top 4 takeaway of US FOMC decision
Thanks to Kathy Lien for the following summarisation of the key elements of today's FOMC decision:Fed Tapers by Another $10 billion, Starting February $5 Billion Reduction each in MBS and Treasuries Uber Dove Janet Yellen Supports Taper Decision was Unanimous 17:11: Borrowing data due tomorrow
The next 12 hours will be marked by the US Federal Reserve decision on where they are taking quantitative easing. This is due at 19:00 GMT.
Tomorrow is quite light in terms of GBP-specific event risk. We have borrowing and money supply data due at 09:30 but this is strictly second-tier in nature and will likely be uneventful.
Tomorrow morning we will be watching the Eurozone where German GDP and employment figures are due as are business climate and economic sentiment data from the Eurozone.
This should provide GBP/EUR with some excitement.17:09: GBP/CAD struggles, but is a breakout beckoning?
We continue to watch the pound to Canadian dollar exchange rate with interest. Shaun Osborne gives his latest assessment of the currency:
"GBP/CAD is struggling to push on through 1.8550 which has held up the rally over the course of the past week. A potential top/minor reversal might be forming here but downside risks only build if the GBP breaks below 1.8250. Perhaps more likely — given the strong, underlying bull trend that is still evident here — is that the market is simply consolidating ahead of another push higher.
"We remain bullish overall. Sustained gains through 1.82 are signaling the potential for an extension towards 1.92 in the weeks ahead. We remain bullish."16:14: Rand and Lira - Where the action is
Yes, our own British pound has been a welcome snore-fest today, but where has the action been?
In the likes of the Rand and Lira - read up on what is keeping currency markets excited today.15:28: GBP reversing vs USD
"GBP/USD edging lower for a second day as price continues to fail to hold above 1.6600 - potentially in the process of forming a reversal despite solid fundamentals. But bullish trend ~1.6380 still intact." - UKForex.14:28: Keep an eye on UK wages going forward
Is this a clarification to Forward Guidance? The implication being that we have only been watching one element of the equation.
Speaking in Edinburgh, BOE Governor Carney has said: “What drives consumption is wages and employment. We’re getting employment, but we’re not seeing the wage growth.”14:10: Markets in the red, sterling immune to all this?
If you were looking for excitement in the sterling crosses today, you will be sorely disappointed! All the action is happening in equities where we are seeing another hefty slump. All the while GBP remains stable. A harbour in the storm?
Where is the problem? It is in Emering Markets of course.
Some snaps from those we follow:
"Just an ugly, ugly day out there. Turkish lira already weaker than pre-rate hike levels. Same with SA #rand. This could escalate quickly." - Matt Weller at GFT. "Turkey's index of bank equities plunges 7%" - Steve Collins at London & Capital Asset Management. "From being up 150 points after the Turkish rate decision Dow futures are now predicting a 115 point fall for the open" - James Hughes at Alpari. "South African Reserve Bank hikes key interest rate to 5.50%" - Investing.com. 12:42: A bit of Carney action coming up
Market attention will be focused on Bank of England Governor Mark Carney in the next hour.
Jonathan Pryor, Corporate Treasury Analyst at Investec says:
"Mark Carney speaks from Edinburgh at GMT 13.15. It is not clear exactly what he will focus on, but it is unlikely to be guidance, since he spoke about this several times in Davos."
"Instead he may well have to discuss a hornets’ nest of Scottish independence and his views on what form the monetary arrangements may take, for example a shared pound, should there be a ‘yes’ vote.”
“We also anticipate a nod towards yesterday’s GDP figures, which saw 0.7% growth for the UK economy in Q4 2013, last year was the first 12 months of uninterrupted growth since 2007, before the global financial crisis. It will be interesting to see the effects on the pound as markets digest Carney’s speech."EUR/GBP to remain under pressure say MIG Bank
MIG Bank tell us the euro is likely to remain under pressure against the pound:
"EUR/GBP declined significantly on Monday near the resistance implied by a steeper declining trendline. A break of the initial resistance at 0.8253 is needed to suggest a return of some short-term buying interest. Hourly supports stand at 0.8210 (24/01/2014 low) and 0.8168. Another resistance lies at 0.8306.
"In the longer term, the technical structure remains negative as long as prices remain below the resistance at 0.8350 (13/01/2014 high). Monitor the support implied by the 61.8% retracement (of the 2012-2013 rise) at 0.8160. Another key support can be found at 0.8082 (01/01/2013 low)."11:44: British pound (GBP) weakens
We are seeing some weakness creeping into the British pound with no obvious clues as to why. It is worth keeping in mind that currency markets will be positioning themselves ahead of today's FOMC decision on tapering. 10:49: NZD dollar - be aware!
The pound is enjoying levels around the 2.0 level against the NZ dollar. But be aware, risk is heightened with a RBNZ decision ahead. Find out all the latest views on the issue here. EUR/GBP remains vulnerable
UBS on the outlook for the euro pound:
"The important resistance is at 0.8349. While this holds, the cross remains vulnerable to extend its bearish trend to test support at 0.8160. A close below which would be the next bearish development."09:49: Staying bearish on the EUR/GBP
More from Ozkardeskaya, this time on the euro pound exchange rate (EUR/GBP):
EURGBP traded in the range of 0.82350/82500. Technical indicators are mixed, we keep our bearish view as long as the 21-dma (currently at 0.82745) resistance holds.09:36: GBP/USD bias on the upside
Also backing the GBP/USD higher is Ipek Ozkardeskaya at Swissquote Bank:
"Trend and momentum indicators remain in the bullish zone for a daily close above 1.6425. The bias is on the upside."09:32: Sterling remains bullish vs the US dollar
Craig Erlam at Alpari UK is bullish on sterling's prospects against the US dollar today:
"Sterling is continuing to look bullish against the dollar, after finding significant support around the 50 fib level on Friday before gapping higher at the start of the week. Yesterday’s spinning top candle may have hinted at a bearish reversal today, however the early retracement was short-lived and the pair didn’t even come close to taking out yesterday’s lows.
"Instead it has continued to rally and looks likely to take out yesterday’s highs which would make any reversal very unlikely in the short-term. Once these highs are taken out, the next target will be 1.6667 followed by 1.6745, 28 April 211 high. If we do see a move to the downside, the first target will be yesterday”s lows, around 1.6535, followed by this week’s lows of 1.6473."09:28: Gains for pound vs the euro on Eurozone money supply data
Some negative data just out of the Eurozone has helped push the pound to euro exchange rate a little higher:
M3 Money Supply (YoY) (Dec) came in at 1%, well below the expected 1.7% and below the previous month's 1.5%.
Italian business confidence is also looking pretty poor coming in at 97.7, below an expected 98.7 and a decline from the previous months 98.2.08:45: Australian dollar to outperform GBP today
We hear from Citigroup Inc who see the Australian dollar outperforming sterling today:
"AUD may outperform on renewed risk appetite as the Turkey’s central bank raised the interest rates to stabilise its currency. AUD/GBP may recover to 0.5480, with support at 0.5212."08:39: Forecasting recent ranges to hold
The British pound, "remains well supported by the recent run of data and the impact on UK yields. The lack of UK data today suggests the 1.6530-1.6630 range in GBP/USD seen yesterday is likely to hold in the absence of US surprises from the FOMC, while 0.8220-0.8260 should contain EUR/GBP. Carney speaks today, but is unlikely to add to the impression already supplied from his recent comments at Davos," say Lloyds Bank Research.08:20: Markets take a steady approach to UK rate expectations
Today's trading in the pound sterling will be a reflection on yesterday's GDP release.
"This steady pace of growth works very well for the Bank of England. If GDP growth exceeded by 0.7% in a significant way, the central bank would be pressured to raise rates, especially with the unemployment rate falling rapidly. The U.K. economy is still expanding at a healthy pace and today's marginally slower GDP growth (GDP expanded 0.8% in Q3), gives the central bank more breathing room to keep monetary policy steady," says Kathy Lien at BK Asset Management.08:16: Are you jumping into 'high risk' assets today?
So, the Turkish issue appears to have been dealt with and this is driving currency markets today. However, it appears to be absolutely neutral with regards to sterling.
My initial reaction to the news is that it smells of panic and might even have an unwelcome effect once the market gets to thinking about it. We haven’t been seeing a massive pile-up of TRY shorts, it’s simply been over-aggressive EM investment strategies being forced to bail out all at once. Will a rate rise stop the panic bail-out? Probably not in my opinion.
I wouldn’t be buying risk-trades on the back of it, let’s put it that way.
Either way, it seems most British pound (GBP) crosses have been rather immune to the broader Emerging Market issue (Except GBP-TRY which is 3pct down) suggesting Sterling is firmly fixated on internal issues at present i.e Bank of England, economic releases, interest rate expectations etc.Foreign Exchange Rates Overnight: Shock and Awe in Turkey
Investors are a great deal happier on Wednesday, largely on signs that risk associated with Emerging Markets is fading. Overnight action in Turkey has been key to this:
"Shock and Awe - The Central Bank of the Republic of Turkey raised interest rates by 425bp to 12% sending the Turkish Lira soaring vs USD and EUR. The market only anticipated a 200bp making today's 400bp rate hike a major surprise. Turkey's decision to raise rates by 425bp reflects level panic inside the central bank and is a sign of their commitment to end the crisis of confidence in their currency. They are sending a strong message to the market they will do whatever it takes attract investment back into their country. For the rest of the world, today's bold move by Turkey mitigates the risk of spillover and reduces uncertainty." - Kathy Lien at BK Asset Management
22:30: British pound shoots higher vs New Zealand dollar
The pound sterling has shot higher against the New Zealand dollar despite the Reserve Bank of New Zealand's promise to begin raising interest rates soon from the current 2.5%. This tells us markets were confident of a rate hike. The only kiwi negative comment made by the Central Bank Governor Wheeler was his concern about the strong currency.
22:00: Top 4 takeaway of US FOMC decision
Thanks to Kathy Lien for the following summarisation of the key elements of today's FOMC decision:Fed Tapers by Another $10 billion, Starting February $5 Billion Reduction each in MBS and Treasuries Uber Dove Janet Yellen Supports Taper Decision was Unanimous
17:11: Borrowing data due tomorrow
The next 12 hours will be marked by the US Federal Reserve decision on where they are taking quantitative easing. This is due at 19:00 GMT.
Tomorrow is quite light in terms of GBP-specific event risk. We have borrowing and money supply data due at 09:30 but this is strictly second-tier in nature and will likely be uneventful.
Tomorrow morning we will be watching the Eurozone where German GDP and employment figures are due as are business climate and economic sentiment data from the Eurozone.
This should provide GBP/EUR with some excitement.
Tomorrow is quite light in terms of GBP-specific event risk. We have borrowing and money supply data due at 09:30 but this is strictly second-tier in nature and will likely be uneventful.
Tomorrow morning we will be watching the Eurozone where German GDP and employment figures are due as are business climate and economic sentiment data from the Eurozone.
This should provide GBP/EUR with some excitement.
17:09: GBP/CAD struggles, but is a breakout beckoning?
We continue to watch the pound to Canadian dollar exchange rate with interest. Shaun Osborne gives his latest assessment of the currency:
"GBP/CAD is struggling to push on through 1.8550 which has held up the rally over the course of the past week. A potential top/minor reversal might be forming here but downside risks only build if the GBP breaks below 1.8250. Perhaps more likely — given the strong, underlying bull trend that is still evident here — is that the market is simply consolidating ahead of another push higher.
"We remain bullish overall. Sustained gains through 1.82 are signaling the potential for an extension towards 1.92 in the weeks ahead. We remain bullish."
"GBP/CAD is struggling to push on through 1.8550 which has held up the rally over the course of the past week. A potential top/minor reversal might be forming here but downside risks only build if the GBP breaks below 1.8250. Perhaps more likely — given the strong, underlying bull trend that is still evident here — is that the market is simply consolidating ahead of another push higher.
"We remain bullish overall. Sustained gains through 1.82 are signaling the potential for an extension towards 1.92 in the weeks ahead. We remain bullish."
16:14: Rand and Lira - Where the action is
In the likes of the Rand and Lira - read up on what is keeping currency markets excited today.
Speaking in Edinburgh, BOE Governor Carney has said: “What drives consumption is wages and employment. We’re getting employment, but we’re not seeing the wage growth.”
Where is the problem? It is in Emering Markets of course.
Some snaps from those we follow:
Jonathan Pryor, Corporate Treasury Analyst at Investec says:
"Mark Carney speaks from Edinburgh at GMT 13.15. It is not clear exactly what he will focus on, but it is unlikely to be guidance, since he spoke about this several times in Davos."
"Instead he may well have to discuss a hornets’ nest of Scottish independence and his views on what form the monetary arrangements may take, for example a shared pound, should there be a ‘yes’ vote.”
“We also anticipate a nod towards yesterday’s GDP figures, which saw 0.7% growth for the UK economy in Q4 2013, last year was the first 12 months of uninterrupted growth since 2007, before the global financial crisis. It will be interesting to see the effects on the pound as markets digest Carney’s speech."
"EUR/GBP declined significantly on Monday near the resistance implied by a steeper declining trendline. A break of the initial resistance at 0.8253 is needed to suggest a return of some short-term buying interest. Hourly supports stand at 0.8210 (24/01/2014 low) and 0.8168. Another resistance lies at 0.8306.
"In the longer term, the technical structure remains negative as long as prices remain below the resistance at 0.8350 (13/01/2014 high). Monitor the support implied by the 61.8% retracement (of the 2012-2013 rise) at 0.8160. Another key support can be found at 0.8082 (01/01/2013 low)."
"The important resistance is at 0.8349. While this holds, the cross remains vulnerable to extend its bearish trend to test support at 0.8160. A close below which would be the next bearish development."
EURGBP traded in the range of 0.82350/82500. Technical indicators are mixed, we keep our bearish view as long as the 21-dma (currently at 0.82745) resistance holds.
"Trend and momentum indicators remain in the bullish zone for a daily close above 1.6425. The bias is on the upside."
"Sterling is continuing to look bullish against the dollar, after finding significant support around the 50 fib level on Friday before gapping higher at the start of the week. Yesterday’s spinning top candle may have hinted at a bearish reversal today, however the early retracement was short-lived and the pair didn’t even come close to taking out yesterday’s lows.
"Instead it has continued to rally and looks likely to take out yesterday’s highs which would make any reversal very unlikely in the short-term. Once these highs are taken out, the next target will be 1.6667 followed by 1.6745, 28 April 211 high. If we do see a move to the downside, the first target will be yesterday”s lows, around 1.6535, followed by this week’s lows of 1.6473."
M3 Money Supply (YoY) (Dec) came in at 1%, well below the expected 1.7% and below the previous month's 1.5%.
Italian business confidence is also looking pretty poor coming in at 97.7, below an expected 98.7 and a decline from the previous months 98.2.
"AUD may outperform on renewed risk appetite as the Turkey’s central bank raised the interest rates to stabilise its currency. AUD/GBP may recover to 0.5480, with support at 0.5212."
"This steady pace of growth works very well for the Bank of England. If GDP growth exceeded by 0.7% in a significant way, the central bank would be pressured to raise rates, especially with the unemployment rate falling rapidly. The U.K. economy is still expanding at a healthy pace and today's marginally slower GDP growth (GDP expanded 0.8% in Q3), gives the central bank more breathing room to keep monetary policy steady," says Kathy Lien at BK Asset Management.
My initial reaction to the news is that it smells of panic and might even have an unwelcome effect once the market gets to thinking about it. We haven’t been seeing a massive pile-up of TRY shorts, it’s simply been over-aggressive EM investment strategies being forced to bail out all at once. Will a rate rise stop the panic bail-out? Probably not in my opinion.
I wouldn’t be buying risk-trades on the back of it, let’s put it that way.
Either way, it seems most British pound (GBP) crosses have been rather immune to the broader Emerging Market issue (Except GBP-TRY which is 3pct down) suggesting Sterling is firmly fixated on internal issues at present i.e Bank of England, economic releases, interest rate expectations etc.
"Shock and Awe - The Central Bank of the Republic of Turkey raised interest rates by 425bp to 12% sending the Turkish Lira soaring vs USD and EUR. The market only anticipated a 200bp making today's 400bp rate hike a major surprise. Turkey's decision to raise rates by 425bp reflects level panic inside the central bank and is a sign of their commitment to end the crisis of confidence in their currency. They are sending a strong message to the market they will do whatever it takes attract investment back into their country. For the rest of the world, today's bold move by Turkey mitigates the risk of spillover and reduces uncertainty." - Kathy Lien at BK Asset Management
