British Pound (GBP) LIVE: Sterling Forecasts, Insights and Latest News on Monday 3rd March

GBP to EUR:

1.1978

GBP to USD:

1.2599

GBP to AUD:

1.9396

GBP to CAD:

1.7768

GBP to NZD:

2.1516

GBP to ZAR:

22.7957

With global equity markets witnessing heightened volatility analyst Piet Lammens at KBC Markets comments on the dearth of action in EUR/GBP:

"EUR/GBP was again an oasis of calm in a nervous global market environment. The pair held a tight range roughly between 0.8225 and 0.8250. Sterling lost a few ticks against the dollar and the euro early in the session, but the downside remained well protected.

"A test of 1.67 in cable was rejected. Mid‐morning, sterling even gained a few ticks as the UK manufacturing PMI was reported marginally higher at 56.9 from 56.6. The UK lending and money supply data were less convincing, but had no noticeable impact on sterling trading. The data were soon forgotten and both EUR/GBP and cable hovered sideways near the opening levels, basically going nowhere."

A long-term technical forecast on GBP/EUR has been released by the Research Desk at Afex:

"Despite an established sequence of rising peaks and troughs in weekly terms GBP prices remain vulnerable to regular/sharp set-backs with the market as yet unable to sustain higher for more than several days at a time. Recent buying interest dissipated beyond 1.2250 again, effectively preserving an intermediate range either side of 1.2150, and although good support is expected on any fresh dip toward the psychological 1.2000 level additional work still appears necessary before an (awaited) extension towards the next obvious channel resistance point at 1.2300 develops. Note: this pairing has for the most part followed GBP/USD higher since mid 2013 and this ongoing Sterling demand is likely to keep values under-pinned during Q1/Q2 2014 at least."

"The pound is following the euro and retreating slightly, despite a decent reading of manufacturing data that was above expectations. The U.K. equity market is set for its biggest fall in eight months, over tensions in Ukraine, so expect some weakness to spill over into the pound until we get clarification on how this will play out." - Jean-Pierre Doré at Western Union.

Our comment at 10:09 alluded to the desire of the Bank of England to see GBP levels capped.

RBS analyst Paul Robson says he doubts a strong sterling will play a negative role in the UK recovery. However, there are many dynamics to keep an eye on:

"GBP weakness in the aftermath of the financial crisis didn't appear to support export volumes, so it's less clear it will have a negative impact as it strengthens. Currency gains would most likely dampen inflation pressures, something that would in turn lessen the need for monetary policy to be tighten. Over recent quarters governor Carney has made more of the positive impact on household finances (from lower CPI) rather than the negatives for exports for currency gains. Nevertheless, McCafferty comments play to the view that GBP/USD may struggle to hold above 1.70 for very long as MPC jawboning on the currency intensifies. It also supports the view that the first BoE tightening comes August 2015 rather than Feb/May-15."

Cable is under pressure on Monday but GBPUSD short‐term technicals remain bullish, "all studies are clinging to buy signals; but so far no clear sell signals have been generated. We hold a GBP year‐end forecast of 1.64," says Camilla Sutton at Scotiabank.

Short GBPUSD: Tactical trade for the coming week from Barclays:

"A combination of our above-consensus forecast for US data and below-consensus forecast for UK data suggest modest downside risk to GBPUSD."

In light of our previous entry we consider whether global risk sentiment has indeed had an impact on FX. Stephen Gallo at BMO Capital says:

"Neither ‘risk-on’ nor ‘risk-off’ appeared to be the dominant theme this morning. News flow from the Ukraine and the Black Sea appeared to have little impact on G10 FX, but fundamental data (better Euro Area CPI) and short squeezes were responsible for the EUR’s strength. The USD feels soft within the G10 space, meaning that even gains versus the commodity bloc are likely to be very tepid for now. We would avoid USD buying in size for the time being, with the DXY still trading below its 30-day moving average, preferring instead to wait until levels around 80.50 are back in play."

The Emerging Market outflows associated with global risks should keep feeding EUR demand and limit aggressive sell-off in EUR majors.

The EUR/GBP is thus likely to be contained, as noted by Ipek Ozkardeskaya at Swissquote Bank:

"EURGBP continues seeing demand above 0.82000, the bias is marginally positive. However, option offers are placed at 0.82000 for the week ahead, a break below this level should turn 0.82000-level into resistance. On the upside, 21 & 50 day moving averages (0.82508 & 0.82706) should absorb upside pressures."

"The BoE is likely to remain steady with its monetary policy this week, leaving the GBP with a firm tone. Good bids are likely to be in place between 1.660 and 1.665 in GBPUSD for the time being. We think the bigger policy risk facing the GBP is the Financial Policy Committee (FPC) meeting on March 19th." - Stephen Gallo at BMO Capital.

Boris Schlossberg at BK Asset Management notes that FX markets, unlike equity markets, are relatively contained despite growing geo-political tensions:

"Geopoltical risks could soar if Russian military forces a make a move against eastern Ukraine which Ukrainian government and the rest of the Western world would view as a clear violation of the country's sovereignty.

"In any case, the full invasion of eastern Ukraine would increase geopoltical risks exponentially not only because Western powers will escalate their response to the Russian aggression, but also because such a move would raise concerns over the stability of the rest of Eastern europe and the Baltic states as well. If Ukraine becomes the first act in Russia's attempt to re-establish the Soviet empire, such a tectonic shift in geopolticals could turn this regional issue into a key global conflict.

"For now, the markets remain calm as investors continue to bet that a further escalation of military activities is not in the interest of either side. However, the situation is fluid and certainly combustible and any further provocation by Russia could unleash much more serious risk aversion flows in the currency markets over the near term.

The research desk at Afex says continued choppy price action in GBP-USD is on the agenda:

"The market here continues to flirt with important resistance (which starts at 1.6750 and extends toward 1.7000) but despite the encouraging progress Sterling values have made since bottoming out below 1.5000 last July recovery potential is arguably still limited at present.

"If a weekly close beyond 1.7000 could be engineered enough compression already exists to support further GBP advances well into next year. On this basis 1.8000/1.8500 would be reachable (much as EUR/USD should probably be able to re-visit 1.5000 once beyond 1.3850). However, in the near term at least, continued choppy price action cannot be ruled out with 1.6450 and 1.6250 not yet fully out of reach."

"UK PMi 56.9 better than expected. A sting in the tail… CIPS said that the export component slowed due to the 'firmer GBP'" - Steve Collins @ londonandcapital.com.

Be aware of the value of sterling and its impact on the economy. Should the Bank of England deem the strong currency as being a weight on the UK economy then we could expect to hear increased rhetoric aimed at keeping the currency down.

The veracity of the UK recovery has today been confirmed by a stronger than expected Manufacturing PMI reading. Markit Manufacturing PMI (Feb) read at 56.9, analysts had expected 56.5. Last month read at 56.7.

Note the GBP/EUR has lagged the other major pairs because Eurozone PMI data also beat expectations coming in at 53.2, ahead of expectations of 53. Germany read at 54.8, expected = 54.7.

UniCredit are taking a bullish stance on GBP: "A slightly higher PMI survey is likely to keep sterling firm today. We also raised our sterling forecasts last Friday now targeting cable at 1.72 by 4Q14 vs. 1.64 previously and EUR-GBP at 0.81 vs. the previous 0.84."

At Friday's close we saw the formation of two technical signals that will likely influence trading on Monday. Firstly, we had a Long-Term bullish Double Moving Average Crossover (50-week 200-week) form at the close of 1.6742. The price is thus deemed to be in an established trend for the weekly time horizon.

Be aware however that the short-term is a little troubled with the formation of a short-term bearish Momentum signal at the same price. This tells us that near-term pressures are to the downside.

The key driver for the UK currency today will be the release of the market Markit Manufacturing PMI (Feb) which is forecast to come in at 56.5. This lower than last month's 56.7.

Despite equity markets being driven lower by events in Ukraine we note the British pound (GBP) is yet to benefit from any kind of safe-haven demand. The UK currency is marginally higher against the Euro but is lower against a host of other currencies. This includes the pro-risk Australian and Canadian dollars.

"Despite some soft domestic data earlier this month, GBP/USD was well supported last week helped by M&A related flow. This underlying GBP demand is likely approaching the end so in this coming week GBP/USD will likely to be influenced by economic data releases. The manufacturing PMI today provides the key focus today. Following two months of consecutive declines the market is expecting a small tick up in February. However, our economists view risks to the downside; nevertheless we see good support in GBP/USD around the 1.6680 area." - Lloyds Bank Research.