British Pound (GBP) Exchange Rates Recover, Markets Take the Good From Labour Market Data
- Last Updated: 02 April 2014
Updated: Our Live coverage shows the UK pound to be in a period of consolidation at the start of April 2014. With the March PMI series missing expectations the GBP has found little by way of impetus. However, all eyes are on the release of the Service Sector PMI on Thursday which should set the near-term tone.
Keep in touch with our Live Coverage Here. For the archived material for the day in question please scroll through please scroll down.
By Gary Howes
Live British Pound (GBP) Rates.
1.2018
1.2589
1.9329
1.7586
2.1545
22.7708
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.
! ! ! Eco Results at 09:30 ! ! !
Quote to sum it all up
"We don’t expect a restart of the sterling rally already at this stage. The UK currency is looking for a new equilibrium in the ‘forward guidance bis’ era. High profile good news is probably needed to inspired further sterling gains," says Leander Dreyer at KBC Markets.
17:48: BofA maintain their bullish stance on GBP
Myria Kyriacou at Bank of America Merrill Lynch:
"Long GBP has been one of our high conviction calls this year. The currency performed very well in 2013, appreciating 1.7% on a trade-weighted basis, and has continued to perform well so far in 2014.
"While positioning is not stretched, CFTC data shows speculators continue to remain long GBP and DTCC data shows that short-dated option volumes in GBP/USD have tripled in anticipation of GBP positive, M&A fuelled, order flow. We remain positive on GBP."
"Long GBP has been one of our high conviction calls this year. The currency performed very well in 2013, appreciating 1.7% on a trade-weighted basis, and has continued to perform well so far in 2014.
"While positioning is not stretched, CFTC data shows speculators continue to remain long GBP and DTCC data shows that short-dated option volumes in GBP/USD have tripled in anticipation of GBP positive, M&A fuelled, order flow. We remain positive on GBP."
17:28: UK pay rises to accelerate, a GBP-positive event
Surveys such as the REC/KPMG recruitment industry survey point to pay growth accelerating further in coming months, and raising the prospect of pay starting to rise in real terms by the second half of 2014.
"A recovery in real pay growth is likely to be a key determinant of when the Bank of England considers the UK recovery to be truly sustainable looking, and therefore a trigger for when it may feel the economy can withstand higher interest rates." - Markit.
"A recovery in real pay growth is likely to be a key determinant of when the Bank of England considers the UK recovery to be truly sustainable looking, and therefore a trigger for when it may feel the economy can withstand higher interest rates." - Markit.
17:19: GBP/CAD back “on stream”
TD Securities say that after weakening lately the pound/Canadian dollar rally appears to be picking up speed once more:
"GBPCAD is trading strongly today (likely outside range higher), very much in keeping with the pattern of trade observed re-cently—”rounded low” through the turn of the month suggested good interest to buy on dips, minor consolidation and—now—renewed strength.
"This all augurs positively for the cross from a technical point of view we think. Solid support around 1.8000/50 over the past few weeks sets the market up for a potential resumption of the broader trend higher. Trend momentum has weakened a little over the past month but oscillators are well positioned to get back “on stream” bullishly in the next few days."
"GBPCAD is trading strongly today (likely outside range higher), very much in keeping with the pattern of trade observed re-cently—”rounded low” through the turn of the month suggested good interest to buy on dips, minor consolidation and—now—renewed strength.
"This all augurs positively for the cross from a technical point of view we think. Solid support around 1.8000/50 over the past few weeks sets the market up for a potential resumption of the broader trend higher. Trend momentum has weakened a little over the past month but oscillators are well positioned to get back “on stream” bullishly in the next few days."
15:41: GBP/USD to 1.7043?
UBS update their technical forecasts for sterling, regarding GBP/USD:
"Any setback will be viewed as corrective and limited to support at 1.6605. Resistance is at 1.6878, a break above this would open 1.7043."
Regarding EUR/GBP, UBS say:
"The sharp recovery over the past two days was staged after testing critical support at 0.8160. A close below which would be next bearish event, triggering a sell-off to 0.8082. Resistance should hold at 0.8277."
"Any setback will be viewed as corrective and limited to support at 1.6605. Resistance is at 1.6878, a break above this would open 1.7043."
Regarding EUR/GBP, UBS say:
"The sharp recovery over the past two days was staged after testing critical support at 0.8160. A close below which would be next bearish event, triggering a sell-off to 0.8082. Resistance should hold at 0.8277."
15:15: GBP surprisingly chipper
It would appear markets have digested today's labour market data and have decided the initial reaction may have been excessive. As such we are seeing most sterling crosses recover ground. Strong gains in the GBP/CAD exchange rate are currently being witnessed.
14:06: The technical structure for EUR/GBP remains negative
Luc Luyet at MIG Bank gives his latest assessment of the outlook for EUR/GBP:
"EUR/GBP is bouncing near the support at 0.8160 (see below). The break of the hourly resistance at 0.8227 (14/02/2014 high) has invalidated the short-term bearish technical structure. Other resistances can now be found at 0.8254 (50% retracement) and 0.8280 (06/02/2014 low). Hourly supports lie at 0.8217 (intraday low) and 0.8191 (18/02/2014 low).
"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)."
"EUR/GBP is bouncing near the support at 0.8160 (see below). The break of the hourly resistance at 0.8227 (14/02/2014 high) has invalidated the short-term bearish technical structure. Other resistances can now be found at 0.8254 (50% retracement) and 0.8280 (06/02/2014 low). Hourly supports lie at 0.8217 (intraday low) and 0.8191 (18/02/2014 low).
"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)."
12:42: Uptrend still intact
Antero Atilla at Saxo Bank is not put off by recent selling pressure on the GBP/USD:
"While enjoying some steady bidding in the earlier European hours, cable came under strong selling pressure following the poorer-than-expected unemployment numbers a short while ago. GBPUSD has so far, however, seen good support ahead of yesterday's lows, which also coincides with the 38 percent retracement level in the 1.6381—1.1.6822 wave.
"With the overall up-trend still well intact in the cross, we now prepare for cable to find a bid tone once again with a potential break of the 1.6734 level, which would also see it back above the pivot resistance. We will only establish this long positioning, however, at the said break level."
"While enjoying some steady bidding in the earlier European hours, cable came under strong selling pressure following the poorer-than-expected unemployment numbers a short while ago. GBPUSD has so far, however, seen good support ahead of yesterday's lows, which also coincides with the 38 percent retracement level in the 1.6381—1.1.6822 wave.
"With the overall up-trend still well intact in the cross, we now prepare for cable to find a bid tone once again with a potential break of the 1.6734 level, which would also see it back above the pivot resistance. We will only establish this long positioning, however, at the said break level."
12:25: GBP/USD to hit 1.7 today
Yes, you read that correctly. Not my opinion but that of the team at RoboForex:
"Although Pound is moving downwards a bit right now, we think today it may continue moving upwards to reach target at level of 1.7000. Instrument may reach level of 1.6580 and then form another ascending structure towards above-mentioned target."
"Although Pound is moving downwards a bit right now, we think today it may continue moving upwards to reach target at level of 1.7000. Instrument may reach level of 1.6580 and then form another ascending structure towards above-mentioned target."
11:42: More consolidation ahead for sterling
"Cable which spiked to a fresh yearly high of 1.6825 at the start of the week may have set a near term top for now and could spend the rest of this week consolidating towards the 1.6500 figure as profit taking kicks in. The BoE is clearly displeased with any further appreciation in the unit as it fears that higher exchange rates could crimp the recovery in the export sector and therefore the communication from policymakers is likely to remain dovish for the time being." - Boris Schlossberg at BK Asset Management.
10:44: This could be a buying opportunity
Clive Lambert at FuturesTechs comments on where today's price action in Pound Dollar leaves us:
"GBPUSD has had a strong run of late but we had a worry about resistance at 1.6669, where the market topped out on January 24. This concern was seen off last Friday as this pair found love on Valentine's Day. We then saw some upside rejection on Monday and have seen further weakness on today's Bank of England (BoE) and employment reports. However, the weakness on the numbers found support at 1.6661, not too far away from the 1.6669 level mentioned above, and also just above yesterday's low, which was 1.6656.
"It could be argued that this presents a buying opportunity in line with the short-term trend higher, and we are happy to "sponsor" this idea with a trade."
"GBPUSD has had a strong run of late but we had a worry about resistance at 1.6669, where the market topped out on January 24. This concern was seen off last Friday as this pair found love on Valentine's Day. We then saw some upside rejection on Monday and have seen further weakness on today's Bank of England (BoE) and employment reports. However, the weakness on the numbers found support at 1.6661, not too far away from the 1.6669 level mentioned above, and also just above yesterday's low, which was 1.6656.
"It could be argued that this presents a buying opportunity in line with the short-term trend higher, and we are happy to "sponsor" this idea with a trade."
10:29: The bearish correction deepens
ICN Financial have today advised that the outlook for the sterling exchange rate complex has turned bearish:
"The pair dropped yesterday and triggered the weekly recommendation stop-loss; we mentioned in our late session report yesterday and we have altered the position to bearish.
"The negative outlook is based on the GBPUSD returning below the upper Envelopes line with adjusted divergence to 1.30% to be compatible to the pair’s movement. The pair dropped after reaching the resistance areas of the ascending channel on graph.
"Trading below 1.6835 is now negative and might deepen the bearish correction. The current bearishness does not alter the overall upside move as AROON did not offer any reversal signals but only shows weakening signals while Linear Regression Indicators remain positive."
"The pair dropped yesterday and triggered the weekly recommendation stop-loss; we mentioned in our late session report yesterday and we have altered the position to bearish.
"The negative outlook is based on the GBPUSD returning below the upper Envelopes line with adjusted divergence to 1.30% to be compatible to the pair’s movement. The pair dropped after reaching the resistance areas of the ascending channel on graph.
"Trading below 1.6835 is now negative and might deepen the bearish correction. The current bearishness does not alter the overall upside move as AROON did not offer any reversal signals but only shows weakening signals while Linear Regression Indicators remain positive."
09:35: Sterling under pressure as Unemployment rate increases
Lloyds Bank were bang on the money when they predicted the unemployment rate would actually increase today (See earlier entry).
However, there were some good readings on wage increases. This is the proof that slack in the economy is being dealt with and this is what the Bank of England needs to see ahead of an interest rate hike decision.
So while the decline in the unemployment rate will be responsible for current GBP selling we must remember that this is no longer the sole driver of policy.
However, there were some good readings on wage increases. This is the proof that slack in the economy is being dealt with and this is what the Bank of England needs to see ahead of an interest rate hike decision.
So while the decline in the unemployment rate will be responsible for current GBP selling we must remember that this is no longer the sole driver of policy.
09:29: EUR/GBP maintains a positive bias
A quick look at the short-term outlook for the euro pound exchange rate confirms the preference for further moves higher remain provided price action remains above 0.8210. An achievement of targets at 0.8260 & 0.8280 is possible provided the current pullback is not compromise by the data due at the bottom of the hour.
09:09: Vodafone/Verizon flows could support GBP/USD, but Buba to hurt EUR/GBP
An interesting observation as to where demand lies concerning the two largest GBP pairs in coming weeks. Sean Lee at ForexTell notes:
"It’s always difficult to gauge exactly how much still needs to be done or even how much will be done in total but I think it’s a safe guess that there is a significant amount of GBP/USD to be bought over the next week. When combined with the normal month-end fare, some analysts are expecting a total of around USD7.5 billion equivalent, divided between the 21st and the 25th of February.
"I wouldn’t necessarily be turning bullish cable on the back of this news but if you’re already long (like me) then it might be an idea to sit back and wait another week! With the usual month-end Buba (Germany's Bundesbank) buying of EUR/GBP also in the pipeline, EUR/USD bulls also have reasons to be cheerful."
"It’s always difficult to gauge exactly how much still needs to be done or even how much will be done in total but I think it’s a safe guess that there is a significant amount of GBP/USD to be bought over the next week. When combined with the normal month-end fare, some analysts are expecting a total of around USD7.5 billion equivalent, divided between the 21st and the 25th of February.
"I wouldn’t necessarily be turning bullish cable on the back of this news but if you’re already long (like me) then it might be an idea to sit back and wait another week! With the usual month-end Buba (Germany's Bundesbank) buying of EUR/GBP also in the pipeline, EUR/USD bulls also have reasons to be cheerful."
09:05: Technicals say outlook favours further GBP/EUR rise
"A well established series of ascending weekly peaks/troughs is apparent and on this basis any such set-back would most probably be corrective only." - Afex in their forecast for the GBP/EUR, the full account of which can be read here.
09:02: Citigroup see a rate rise in 2014
Staying bullish on GBP are Citigroup:
"GBP may be supported on expectations that the BoE may announce to raise the interest rates in Q4 2014. GBP/USD may hold above 20day MA at 1.6516 and rise toward 1.6878-1.7043."
"GBP may be supported on expectations that the BoE may announce to raise the interest rates in Q4 2014. GBP/USD may hold above 20day MA at 1.6516 and rise toward 1.6878-1.7043."
08:27: UniCredit see improved employment picture
"The labour market report should see the unemployment rate holding at 7.1% and annual average earnings growth rising to 1.0%" - UniCredit.
08:16: Beware, unemployment rate could actually tick up
Have markets grown to confident on the recovering UK employment picture. Lloyds Bank warn Sterling bulls that this could indeed be the case:
"GBP/USD has corrected modestly lower this week after making decent gains post-QIR. The softer than expected inflation numbers yesterday further weighed on GBP. Market focus will turn to the labour market statistics this morning. Although the importance of the ILO unemployment rate was somewhat softened in the QIR, it should still attract significant attention. While the Bloomberg survey shows a range of forecasts from 7.0% to 7.3%, most market forecasters are expecting unemployment to remain unchanged at 7.1%. However our economists see risks of the unemployment rate ticking up to 7.2% due to smaller fall in unemployment compared to the previous report."
"GBP/USD has corrected modestly lower this week after making decent gains post-QIR. The softer than expected inflation numbers yesterday further weighed on GBP. Market focus will turn to the labour market statistics this morning. Although the importance of the ILO unemployment rate was somewhat softened in the QIR, it should still attract significant attention. While the Bloomberg survey shows a range of forecasts from 7.0% to 7.3%, most market forecasters are expecting unemployment to remain unchanged at 7.1%. However our economists see risks of the unemployment rate ticking up to 7.2% due to smaller fall in unemployment compared to the previous report."
08:00: Today is key day for the GBP outlook
The near-term outlook for the British pound (GBP) is heavily reliant on today, indeed action in the pound exchange rate complex for the rest of the month could well be decided by today's price action.
At 09:30 we have the release of minutes from the February MPC meeting at the Bank of England. However, because we have also had the quarterly inflation report last week we would expect reaction to be muted.
The big event though will be the release of employment data, also at 09:30. We won't be overly concerned about the unemployment rate, rather we will be looking for signs that wage growth is picking up. This would be a sign that slack in the economy is picking up as workers become more productive and are paid accordingly. Analysts are forecasting a reading of 0.9% for Average Earnings excluding Bonus (3Mo/Yr) (Dec). Average Earnings including Bonus (3Mo/Yr) (Dec) is expected at 1 pct.
At 09:30 we have the release of minutes from the February MPC meeting at the Bank of England. However, because we have also had the quarterly inflation report last week we would expect reaction to be muted.
The big event though will be the release of employment data, also at 09:30. We won't be overly concerned about the unemployment rate, rather we will be looking for signs that wage growth is picking up. This would be a sign that slack in the economy is picking up as workers become more productive and are paid accordingly. Analysts are forecasting a reading of 0.9% for Average Earnings excluding Bonus (3Mo/Yr) (Dec). Average Earnings including Bonus (3Mo/Yr) (Dec) is expected at 1 pct.
Tuesday in review
For the full picture please see yesterday's article.
