British Pound Sterling Falls Against All-Powerful Euro
- Written by: Gary Howes
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- 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.
Live GBP Exchange Rates:
- vs EUR:1.1981
- vs ZAR:22.8158
- vs USD:1.2599
- vs NZD:2.1514
- vs AUD:1.9392
- vs CAD:1.7764
17:17: GBP-USD precariously low to key handle
"The pound is flat on the day, but sitting precariously close to the 1.6600 handle against the USD, which could foreshadow a continued drop if we close below this level for the day. That being said, there was solid buying interest in sterling in London at midday and this is propping up the market. The overall picture is still favouring holding long positions in GBP/USD for a retest of the 1.6700 area in the short term, but this will change if we see a close below 1.6600." - Jean-Pierre Doré at Western Union.
17:02: Euro sterling exchange rate slips
KBC Markets give this assessment of the current dynamics dominating trade in the GBP:
"There was no major news to inspire sterling trading today. However, cross currency price action left its traces in EUR/GBP and cable, too. Both cross rates traded in tight ranges near obvious resistance/support levels. Global uncertainty on China and, to a lesser extent on Ukraine, was the main driver for trading.
"In this context, it was quite remarkable that EUR/USD outperformed cable as one might expect European assets to be more affected by those issues that the UK. The losses on continental European equity markets were slightly bigger than in the UK, but the euro outperformed cable.
"Cable dropped to the key 1.6584 area. At the same time EUR/USD returned to the 1.39 area. This was enough to push EUR/GBP above the 0.8350 range top. The euro continues to show remarkable strength and EUR/GBP is no exception to the rule."
13:04: Swissquote - This looks like a mere correction
"GBP/USD declined further yesterday and is now close to its key support at 1.6584. Hourly resistances stand at 1.6653 and 1.6686 (previous support). Another support lies at 1.6538 (50% retracement of the rise from the low at 1.6252). 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). The recent weakness still looks like a correction within an underlying uptrend." - Swissquote Bank.
12:53: £ / $ support at 1.6585 will open up further selling pressure
All is not lost for the uptrend in the pound dollar exchange rate. Indeed, many are citing levels around 1.6580 as being key to the outlook.
An analysis issued by Gainsy today confirms this:
"GBP/USD dropped sharply yesterday to a fresh 2-week low at 1.6623. There are some bearish signals emerged on the chart that may strengthen the reversal scenario, including: double high pattern on the daily chart, bearish divergence on the Relative Strength Index (RSI), which made two lower highs while the price made higher highs.
"Normally this suggests that the bullish momentum may be fading. Also, on the bigger picture, the current highs represent 50% Fib retracement of the long term drop between 2.0158 and 1.3503 (the last decade bottom), and actually the pair failed to overcome the broader resistance area (1.6750-1.700) since late 2008.
"All in all, we will keep our focus on February's bottom of 1.6585, which is also the support pivot of the mentioned pattern, with a break here to confirm our forecast, thus recommends a short trade."
12:36: Look at GBP-CAD go
The ascending support structure on the GBP-CAD chart is second to none when it comes to being true. Today we see the pound up 0.4 pct against the Canadian dollar confirming that the longer-term uptrend remains intact.
11:09: OECD confirms UK economy to outperform in 2014
The UK's economic recovery will be the strongest among G7 economies over the first half of 2014, according to the latest predictions from the Organisation for Economic Co-operation and Development (OECD).
The UK economy is forecast to grow over the six months at a speed that would give an annual growth rate of 3.3%, outpacing the US, Japan, Germany, France, Italy and Canada.
10:56: GBP-USD bull run supported as long as 1.6220 remains supportive
This technical forecast for Cable comes courtesy of MIG Bank analyst Luc Luyet:
"GBP/USD declined further yesterday and is now close to its key support at 1.6584. Hourly resistances stand at 1.6653 and 1.6686 (previous support). Another support lies at 1.6538 (50% retracement of the rise from the low at 1.6252).
"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). The recent weakness still looks like a correction within an underlying uptrend."
10:44: Eurozone Industrial Production sinks GBP-EUR
Boosting the shared currency today is a good release from the Eurozone industrial component. Industrial Production w.d.a. (YoY) (Jan) read at 2.1%, well above the 1.9% expected.
Markets have ignored the fact that the MoM figure for January came in at -0.2%, analysts had hoped for 0.5%.
10:38: GBP/EUR selling intensifies, 1.19 next
The selling on the GBP-EUR cross is pretty relentless at present and we would imagine a quick decline to 1.19 to occur from here now that the support around 1.2 has given way.
One would think it was the Eurozone and not the UK that was enjoying a booming recovery.
Nevertheless, this will please Mark Carney and his team. The opposite feelings at the ECB will be felt.
09:40: Is the £ weakness overdone?
Analysts at Lloyds Bank Research suggest the current sell-off may be overextended:
"But the data remains strong enough to suggest that the recent narrowing of spreads with the US and Eurozone is overdone, and GBP also looks technically well supported near current levels against both the USD and the EUR. While there is no UK news today (with UK trade data delayed until Friday) to justify a GBP recovery, we feel the recent dip is a little overdone and ECB speeches may help trigger a GBP rally vs the EUR."
08:27: Time to buy cheap GBP
This speculative trade idea comes from Sean Lee at ForexTell:
"The GBP has given back some of its big gains especially on crosses like EUR/GBP but the overall bull trend in cable remains in place.
"There is strong technical support at 1.6580 but there will also be tight stops directly below there.
"I like the idea of waiting for the weak stops to get triggered and then buy. I’ve read some reports of decent sized bids near 1.6570 so perhaps buy there with a tightish stop?"
08:17: Markit predict a boom year for the UK, can the pound follow?
The UK economy is certainly looking good, but this will not necessarily translate into a straight line higher for the UK currency.
According to Markit:
"A better than expected January sets the scene for what may be a boom year for UK manufacturers. Manufacturing enjoyed a strong start to the year, according to official data, and new survey evidence indicates that the year as a whole may be one of the best that goods producers have seen in recent history.
"With export markets picking up, domestic demand buoyed by a surge in construction, rising business confidence and increasing consumer spending, as well as Bank of England pledging to keep interest rates at record lows into 2015, manufacturers are expecting a boom year."
08:14: UniCredit calling time on GBP gains
"Given the strong appreciation of sterling in recent months, the uneasiness of the BoE regarding further sterling strength and Mark Carney’s not too hawkish rate outlook, we expect cable to develop some more correction potential below 1.66 and then towards 1.6550." - UniCredit.
08:09: Pound advances against Australian dollar
The British pound (GBP) is higher against the Australian dollar today as renewed concerns on a China slowdown took to Asian markets overnight.
Also weighing on the AUD, and this again related to China, copper fell beneath the key $3.00 support level and fell more than 2% yesterday.
Nevertheless, Labour market data in Australia for February are expected to come in quite healthy tonight and may thus push AUD-USD back towards above 0.9050.
But, given recent RBA remarks that the AUD is still high, investors will probably be cautious about riding a much stronger rally here
