British Pound (GBP) LIVE: Sterling 2014 Forecasts Upgraded at UniCredit
- Last Updated: 04 April 2014
Updated: The GBP is an underperformer on the first Friday of April. With US Non-Farm
Payrolls coming out in support of the commodity dollar complex we are seeing the UK currency suffer against the likes of the AUD, CAD and NZD. The unit is stable against the USD and EUR.
Those hoping for the pound sterling uptrend to re-establish itself will be disappointed. The deterioration in the GBP-CAD uptrend (image at righ) is representative of the malaise being seen by many of the CAD crosses.
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
Today's Sterling (GBP) Rates.
1.2074
1.2545
2.0074
1.8063
2.2212
23.0724
16:13: The uptrend in the GBP remains intact
"The pound is slightly stronger against the USD today, but well off its intraday highs as it feels the impact of euro buyers stepping in following the euro zone CPI report. Domestic U.K. data was strong, with house prices rising 9.4 percent on an annualised basis for January—the biggest increase in nearly four years. The uptrend in the GBP remains intact for a near-term test of 2014 highs above 1.6800." - Jean-Pierre Doré at Western Union.
13:56: UniCredit upgrade Sterling forecasts
The FX team at UniCredit have today told clients they are upgrading their sterling forecasts for 2014:
"In G10 we take a closer look at the state of the UK economy on the back of the recent release of GDP for 4Q13, which also provided us with the expenditure breakdown.
The most interesting feature of the report, in our view, is the noticeable pick-up in investment – and more importantly, business investment – something which makes the recovery more balanced and hence, more sustainable.
"This has increased our confidence in the robustness of the economy and has led us to increase our sterling forecasts. We now see GBP-USD at 1.72 (EUR-GBP at 0.81) by end-2014 and at 1.75 (0.83) for end-2015."
"In G10 we take a closer look at the state of the UK economy on the back of the recent release of GDP for 4Q13, which also provided us with the expenditure breakdown.
The most interesting feature of the report, in our view, is the noticeable pick-up in investment – and more importantly, business investment – something which makes the recovery more balanced and hence, more sustainable.
"This has increased our confidence in the robustness of the economy and has led us to increase our sterling forecasts. We now see GBP-USD at 1.72 (EUR-GBP at 0.81) by end-2014 and at 1.75 (0.83) for end-2015."
13:53: Next week packed with action
UniCredit Bank give us a preview of what markets will be fixating on next week:
"Next week is packed with very important data releases and events. Things kick off in the early hours of Saturday with the official Manufacturing PMI for China. Expectations are for a further decline to 50 but watch for a negative surprise that would indicate that Chinese manufacturing is contracting, which would compound the pressure on the yuan.
"Then, next week, we anticipate the main drivers to be the ISM index and the employment report in the US – which we expect will show renewed strength – and the ECB rate decision.
"Particular attention will also be paid to several PMI releases around the globe and the rate decisions in Australia and Canada, as both events will be accompanied by a statement; we do not expect any changes in interest rates in either of them. The Bank of England also meets next week, but we think it will be a non-event."
"Next week is packed with very important data releases and events. Things kick off in the early hours of Saturday with the official Manufacturing PMI for China. Expectations are for a further decline to 50 but watch for a negative surprise that would indicate that Chinese manufacturing is contracting, which would compound the pressure on the yuan.
"Then, next week, we anticipate the main drivers to be the ISM index and the employment report in the US – which we expect will show renewed strength – and the ECB rate decision.
"Particular attention will also be paid to several PMI releases around the globe and the rate decisions in Australia and Canada, as both events will be accompanied by a statement; we do not expect any changes in interest rates in either of them. The Bank of England also meets next week, but we think it will be a non-event."
11:48: Euro continues to dominate
With the GBP/EUR having slipped by nearly half a percent on Friday, Boris Schlossberg comments on why the euro is dominating proceedings today:
"The EUR/USD has been under constant threat of possible further rate cuts since the start of the year as deflation appeared to have taken hold in the EZ. The CPI data still remains woefully low - below 1% and well below the 2% ECB target - but the small rise in the flash reading today indicates that the worst of the deflationary pressures may have passed."
"The EUR/USD has been under constant threat of possible further rate cuts since the start of the year as deflation appeared to have taken hold in the EZ. The CPI data still remains woefully low - below 1% and well below the 2% ECB target - but the small rise in the flash reading today indicates that the worst of the deflationary pressures may have passed."
11:24: Outlook for Cable? Down then up
"Pound is still forming consolidation channel; market may yet continue moving downwards. We think, today price may move downwards to reach level of 1.6575 and then continue growing up towards level of 1.7000." - RoboForex.
10:19: Key levels for EUR/GBP
With the euro in focus on Friday, we consider where the key technical levels lie.
Luc Luyet at Swissquote Bank has the following outlook note to offer:
"EUR/GBP has broken the support at 0.8215, opening the way for further short-term weakness. Other supports stand at 0.8191 (18/02/2014 low) and 0.8158. Hourly resistances can be found at 0.8224 (27/02/2014 high) and 0.8257 (25/02/2014 high).
"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)."
Luc Luyet at Swissquote Bank has the following outlook note to offer:
"EUR/GBP has broken the support at 0.8215, opening the way for further short-term weakness. Other supports stand at 0.8191 (18/02/2014 low) and 0.8158. Hourly resistances can be found at 0.8224 (27/02/2014 high) and 0.8257 (25/02/2014 high).
"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)."
10:16: Euro surges, CPI picks up pace
Inflation in the Eurozone has actually picked up pace it has been shown today.
Consumer Price Index (YoY) (Feb) came in at 0.8 pct, unchanged on last month but ahead of predictions for 0.7 pct.
Inflation is a key determinant of monetary policy and today's reading suggests markets are betting that the ECB won't cut interest rates further in this environment.
Consumer Price Index (YoY) (Feb) came in at 0.8 pct, unchanged on last month but ahead of predictions for 0.7 pct.
Inflation is a key determinant of monetary policy and today's reading suggests markets are betting that the ECB won't cut interest rates further in this environment.
09:29: The stability of FX as an investment destination
For those who fear FX as a potentially 'dangerous' or volatile investment destination consider this view held in a note issued by Deutsche Bank today:
"An asset class that provides stable returns with low volatility in changing macro environments is a compelling choice for investment. Despite recent wobbles FX as an asset class has provided consistent returns over the past 30 years.
"Equally important is the fairly stable volatility in those returns over the same period. The Deutsche Bank Currency Returns (dbCR) Index, an equally weighted FX benchmark comprised of carry, valuation and momentum strategies, has averaged 3.5% annual returns and 5% volatility since 1980.
"Indeed, excess returns were above 3% in the 80s, 90s and last decade. These stable returns along with low correlation to equities and bonds promote FX as a prime contender for a place in every manager’s portfolio."
"An asset class that provides stable returns with low volatility in changing macro environments is a compelling choice for investment. Despite recent wobbles FX as an asset class has provided consistent returns over the past 30 years.
"Equally important is the fairly stable volatility in those returns over the same period. The Deutsche Bank Currency Returns (dbCR) Index, an equally weighted FX benchmark comprised of carry, valuation and momentum strategies, has averaged 3.5% annual returns and 5% volatility since 1980.
"Indeed, excess returns were above 3% in the 80s, 90s and last decade. These stable returns along with low correlation to equities and bonds promote FX as a prime contender for a place in every manager’s portfolio."
08:57: GBP/EUR buoyed by bullish MACD signal
Last night saw the pound euro rate close at 1.2173. The close at this level resulted in the formation of a Short-Term Bullish MACD signal. This tells us that the up-trend in the GBP/EUR is well established in the short-term.
08:35: 1.68 forms top of Cable's range
Emmanuel Ng at OCBC Bank says he sees the UK currency remaining well supported:
"The GBP-USD ended slightly higher on the day in the wake of broad dollar vulnerability. Meanwhile, the BOE’s Miles also assured markets that the forward guidance would provide enough information content on the monetary authority’s intentions on interest rates. Pending further cues, we continue to look for a supported posture within a 1.6600-1.6800 range for the cable."
"The GBP-USD ended slightly higher on the day in the wake of broad dollar vulnerability. Meanwhile, the BOE’s Miles also assured markets that the forward guidance would provide enough information content on the monetary authority’s intentions on interest rates. Pending further cues, we continue to look for a supported posture within a 1.6600-1.6800 range for the cable."
08:32: GBP/USD may test higher to 1.6823
Sterling rose yesterday on improved risk appetite due to the rises in U.S. equities as S&P reached to a record high.
GBP Outlook according to Citigroup:
"GBP may continue to move higher on expectation of early rate hike in Q4 2014 due to the upbeat economic outlook.
"Technically, GBP/USD may climb to 1.6823 and then 1.71 level, with short term support at 1.6584-1.6605."
GBP Outlook according to Citigroup:
"GBP may continue to move higher on expectation of early rate hike in Q4 2014 due to the upbeat economic outlook.
"Technically, GBP/USD may climb to 1.6823 and then 1.71 level, with short term support at 1.6584-1.6605."
08:16: GBP to be well supported today
"We expect GBP/USD to remain well supported today. US data is unlikely to have much impact on the GBP/USD but continued M&A related GBP demand and month-end rebalancing portfolio flows should see decent support for GBP. For EUR/GBP, we view risks are to the downside. While downside risks are expected for Eurozone CPI this morning following yesterday’s German CPI, we view this will likely weigh on EUR." - Lloyds Bank Research.
08:00: Month-end flows - what to expect
With month end upon us Barclays analyst Yuki Sakasai considers where the demand lies:
"Global equity markets rebounded strongly in February, helped by tentative signs of stabilisation in EM countries and expectations that the Fed will keep rates low for longer. In USD terms, the US equity market has posted the largest increase in market value, while the change in bond market values was rather limited except for the euro area. Given the relative outperformance of US equity markets, our month-end fixing model is showing a modest USD sell signal against JPY, GBP, CAD and AUD and a weak USD sell signal against EUR."
"Global equity markets rebounded strongly in February, helped by tentative signs of stabilisation in EM countries and expectations that the Fed will keep rates low for longer. In USD terms, the US equity market has posted the largest increase in market value, while the change in bond market values was rather limited except for the euro area. Given the relative outperformance of US equity markets, our month-end fixing model is showing a modest USD sell signal against JPY, GBP, CAD and AUD and a weak USD sell signal against EUR."
