British Pound (GBP) Live Action vs Euro, US dollar and More

GBP to EUR:

1.1965

GBP to USD:

1.2568

GBP to AUD:

1.9436

GBP to CAD:

1.7694

GBP to NZD:

2.1566

GBP to ZAR:

22.8661

We believe the pound sterling will discover its legs tomorrow with the release of the Markit Services PMI (Feb). Analysts are predicting a reading of 58.0, just a smidgen lower than last month's 58.3. Any miss here will see the sell buttons hit as it appears there is little appetite to take the UK currency higher at present.

Those looking for action in EUR/GBP must be patient suggest Swissquote Bank:

"EUR/GBP is moving in a short-term horizontal range defined by the support at 0.8191 and the resistance at 0.8267. An initial resistance can be found at 0.8269 (intraday high). A key support lies at 0.8158.

"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)."

"GBP/USD corrected lower yesterday after failed to clear the last week's high of 1.6769 before bottomed out this morning at 1.6642 and currently struggles with the 1.6700 key barrier. On the bearish outlook, the recent bull attempt should be contained below the 1.6725 previous resistance/ weekly high, followed by a dip below the recent lows to expose the main short term support at 1.6584." - Gainsy.

The below analysis comes courtesy of RoboForex:

"Pound is forming another descending structure. We think, today price may continue moving upwards to reach level of 1.7000. Alternative scenario implies that instrument may continue falling down and form correctional flag pattern to reach level of 1.6550. Later, in our opinion, instrument may continue growing up towards its main target."

For those keeping an eye on GBP/CAD, take a look at these predicted levels from TD Securities:

1 GBP will buy 1.84 CAD this quarter.

1 GBP will buy 1.87 CAD in mid year.

1 GBP will buy 1.83 CAD in the third quarter.

1 GBP will buy 1.82 CAD at year end.

Read the full report here.

Shaun Osborne at TD Securities comments on the likelihood of Euro underperformance this week:

"From here, risks are perhaps geared more to the downside for the EUR.

"Firstly, the market peaked above 1.38 again last week and the top of the range held again. Secondly, we think the EUR may emerge weaker from the ECB policy meeting Thursday with some kind of easing a high probability (investors bought EUR last week on the back of higher than expected CPI data which some thought precluded any policy easing Thursday) . Thirdly, any re-escalation in Ukraine tensions should work negatively on the EUR, if only because the USD should find support on safe-haven demand. We prefer to look to fade EUR strength near 1.38."

Luc Luyet at MIG Bank on the outlook for GBP-USD:

"GBP/USD is still viewed in a consolidation phase after its sharp rise from the low at 1.6252. Hourly supports lie at 1.6641 (intraday low) and 1.6617 (27/02/2014 low), while a key support stands at 1.6584. Resistances can be found at 1.6769 and 1.6823.

"In the longer term, the technical structure favours a bullish bias as long as the support at 1.6220 (17/12/2013 low) holds. The decisive break of the resistance at 1.6668 opens the way for a move towards the major resistance at 1.7043 (05/08/2009 high). However, a sustainable move above that level is unlikely in the next few weeks."

There is little appetite for sterling in the aggressively bullish equity market conditions being witnessed on Tuesday. The turnaround in investor sentiment has been impressive and GBP is clearly not benefiting.

All eyes now turn to tomorrow's Services PMI - Ukraine permitting of course - says Boris Schlossberg at BK Asset Management:

"Cable sold off mildly in reaction to the slightly weaker PMI Construction data which came in at 62.6 versus 63.6 forecast, but the drop may have been cause by tough weather conditions and the reading still remains near recent highs. The more interesting question will be tomorrows PMI Services report which is expected to print just slightly lower than the month prior. If the services report remains near the current levels, cable could stage another rally attempt at yearly highs as market will be become even more convinced that BoE will be the first G-7 central bank to hike rates."

One of the highlights of the week ahead concerns the ECB meeting on interest rates due on Thursday. Markets are still jittery as to whether the ECB will cut rates in a low deflationary atmosphere. The strong EUR currently suggests they won't. However, Bank of America Merrill Lynch warn that a rate cut could well materialise in 2014:

"In our view, the ECB is not ready to fire a "bazooka" in this week's meeting, despite very low inflation and rising deflation risks (see Chart of the Day).

"We expect a marginal forecast revision with inflation close to target in 2016, accompanied by a dovish and concerned statement. We also expect measures to strengthen forward guidance - as expectations start to drift away slightly - such as the extension of the 3M MRO full allotment fixed rate into 2016.

"Looking ahead, we believe that the ECB is not worried about deflationary risks yet. However, the ECB might be pushed into action at the April meeting, or this summer, if inflation falls further."

Ipek Ozkardeskaya at Swissquote Bank says waning interest in the EUR should soon assist GBP-EUR:

"Released in the morning, UK PMI construction showed slower expansion in February. The weakness in data had limited-to-no impact in GBP-trading. Technically, the Cable trades range-bound with slight positive bias, the short-term trend is to remain positive for a daily close above 1.6665 according to MACD 12, 26 day indicator. Option barriers are seen at 1.6685/1.6700 with today expiry, bids trail above 1.6710/50/60 and 1.6800.

"EURGBP remains bid above 0.82000, yet resistance is eyed pre-50 dma (currently at 0.82685). Fading appetite in EUR should soon weigh on the currency pair. On the downside, a breach of 0.82000 will activate the option barriers pre- 0.82000 with today, Wednesday and Thursday expiry. Barriers retreat to 0.81500 from Friday. Upside bets are mixed."

"For today, look towards the construction PMI and a 1.6600-1.6800 range may hold in the interim. Note however that any violation of 1.6600 on the back of heightened geopolitical tensions may prove precipitous, with little of consequence till 1.6500." - Emmanuel Ng at OCBC Bank.

Professional Trader Sean Lee at ForexTell is taking a punt on a falling GBP/AUD exchange rate:

"In the short-term, the overly long GBP market will remain vulnerable to squeezes whilst the geo-political tensions surrounding Ukraine continue. One can make a strong medium-term case for being long GBP whilst the situation is ongoing but in the short-term it will be all about positioning.

"Look to pairs like GBP/CAD and GBP/AUD for some opportunities.

"Risky strategy given the strong up-trend but for all the aforementioned reasons, I think the biggest danger in the market is that over-extended positions start to reduce;

"Market is very long of GBP and quite short of AUD;

"I’m looking to play a short term range between 1.8550/1.8700 with a bearish bias."

UK Construction PMI (Feb) = 62.6 vs 63.2 expected and 64.6 previous. Sterling unchanged.

Today's calendar is dominated by Construction PMI at 09:30. Markets are braced for a reading of 63.0, this better than last month's 64.6. But, not what Lloyds say at 08:15 regarding the relative importance and accuracy of the Markit PMI Construction series.

A morning briefing from Swissquote Bank informs us of where the pressure points lie for GBP:

"GBPUSD eased to 1.6640 in Asia; trend and momentum indicators are flat. UK will publish the construction PMI at 09:30 GMT, the outcome should give some direction to the Cable in the morning. Today’s option barriers are seen at 1.6685/1.6700, bets turn positive above 1.6710. EURGBP remains bid above 0.82000, if broken should run into decent option offers pre -0.82000 for days ahead."

G10 FX proved to be somewhat immune to the heavy selling on global markets witnessed yesterday. With tensions in Ukraine easing somewhat markets are recovering. Sterling appears to be enjoying these conditions and has put on some value.

"Cable is expected to further consolidate close to 1.67, although the February UK Construction PMI due out this morning is likely to have fallen. In turn, EUR-GBP may also continue struggling just above 0.82." - L. Cazzulani,

Lloyds Bank Research warn against reading too much into today's construction PMI. They also see demand for Sterling remaining intact:

"The manufacturing PMI came in marginally better than expected yesterday; the rise in the employment component was encouraging. Today's construction PMI typically has very little correlation with construction output, and will likely attract little interest ahead of tomorrow's more important services PMI. IMM data shows that net GBP long positions have now risen to the highest level since January 2013. A continuation of decent domestic data and risks elsewhere suggests demand for GBP will likely persist. But we may need to see a further pick up in speculative GBP long positions to see GBP/USD higher. However, long GBP positions are looking quite extended by historical standards."