British Pound (GBP) Weak Ahead of a Busy Week

Updated: The British Pound (GBP) is stable as we move into the second week of April. Selling on global equity markets has seen some relief being enjoyed against the commodity dollars. Meanwhile, we continue to see consolidation vs the Euro and US dollar. 

This period of consolidation will inevitably give the sterling bulls hope that the 2014 rally can ultimately reassert itself.

For the latest, see our live coverage section. For the archived material you clicked for, please scroll down. 

By Will Peters

Live £ Rates:

• GBP to EUR:
  1.1981
• GBP to USD:
  1.2601
• GBP to AUD:
  1.9394
• GBP to CAD:
  1.7765
• GBP to NZD:
  2.1516
• GBP to ZAR:
  22.7985

16:30: It all kicks off on Wednesday

It should be 'more of the same' on Tuesday with this week's event-risk rammed into Wednesday's session.

Kathy Lien at BK Asset Management says:

"There are a number of important U.K. event risks on the calendar in the coming week but all of them are concentrated on Wednesday, which means that the first 2 days of trading could be quiet.

"In addition to the annual budget, we have the U.K. employment report and the minutes from the most recent Bank of England monetary policy meeting scheduled for release. Based on the PMIs, the labor market data should be strong and for the most part we do not anticipate a change in the central bank's monetary policy bias because there has not been any major changes in the economy since the last meeting."

16:23: Did Vodafone push EUR-GBP higher?

Piet Lammens at KBC Markets on today's trade in the GBP crosses:

"The intraday trading pattern of EUR/GBP was quite similar to what happened in the EUR/USD headline pair. EUR/GBP dropped temporary below 0.8350 early in the session, but the move was soon reversed. The finalisation of the Vodafone/Ono deal might have been slightly supportive for the cross rate, too.

"EUR/GBP moved higher in line with EUR/USD early in the US. However, a new test of Friday’s top (0.8380 area) didn’t occur. Cable showed no clear trend and hovered in the lower half of the 1.66 big figure. The 1.6584/69 range bottom looks safe for now."

16:04: Has GBP reached its nadir vs the EUR?

Growing indications suggest the UK currency's run against the EUR may be over with technical indicators starting to favour the prospects of the shared currency. As noted by ICN Financial:

"The longer term, the breakout of the resistance at 0.8350 (13/01/2014 high) validates a base formation with an implied upside potential at 0.8532. Key resistances stand at 0.8464 (13/11/2013 high) and 0.8585 (29/10/2014 high)." - MIG Bank.

15:05: "As far as I'm concerned, it still looks bullish"

Craig Erlam at Alpari UK updates on his forecast for the GBP-USD:

"This is another pair that has been stuck in a sideways trend over the last couple of weeks, but as far as I’m concerned, it still looks bullish. A double top formed over the last couple of weeks but the pair failed to close below the neckline despite numerous attempts.

"This, at least for now, is a bullish signal in my opinion. Of course that doesn’t mean we won’t get another attempt to break below, but for now at least, the bulls are not allowing a break below the neckline. If this is broken, then it would start to look a lot more bullish and, based on the size of the double top, could prompt a move towards 1.6440.

"Another bullish signal came when the pair retested the top of the descending trend line that it previously broke above. This acted as confirmation of the break and is ordinarily very bullish. For now, the pair is showing no sign of breaking out of this sideways trend. A break below the neckline would indicate that it’s over, as would a break above 7 March highs."

13:02: Sterling dollar still within ascending structure

The latest weekly forecast for the sterling dollar from RoboForex says:

"The Pound continues moving inside ascending structure towards level of 1.7730. We think, during this week, price may complete this correctional flag pattern and then leave it upwards to reach target at level of 1.700. Later, in our opinion, instrument may form new correction to return to level of 1.6900 and then continue growing up towards next target at 1.7470."

12:03: Further consolidation would not be 'untoward'

The following forecast note comes courtesy of Lucy Lillicrap at Afex:

"Within the confines of a pre-existing/incomplete broad uptrend Sterling values here are currently unwinding their prior over-bought condition and further corrective or at least re-consolidative action would not seem untoward prior to an awaited resumption of underlying GBP bullishness.

"If and when the market manages to surpass its recent cycle peak at 1.6825 a more or less direct extension up towards next targeted resistance around 1.7000 will become likely and dips beforehand are viewed as untenable in broad terms. However effective channel support is also still some way off (in the 1.6450 region) and only relatively light support exists beforehand, at 1.6600 for example."

11:20: EUR-GBP faces a positive week's trade

The outlook is positive for the euro against the GBP above the 0.8285 level and the intraday risk-limit is below 0.8160 say ICN Financial in their latest outlook note on the EUR-GBP:

"The sideways trading confines the pair that maintains stability above MA 50 & 100 that supports the upside move over intraday and short term basis, waiting for the breach of 0.8410 to open way for gains toward 0.8500 then 0.8565. Negativity on momentum indicators are forcing the sideways movement that might control the pair in the coming session until the pair can regain enough upside momentum to resume the upside wave that remains valid with stability above 0.8285."

09:50: EUR-GBP in bullish consolidation zone

"EURGBP trades in the bullish consolidation zone; the 21-dma (0.82720) tests the 50 dma (0.82682) on the upside suggesting the extension of gains to 0.83915 (Fibonacci 61.8% on Aug’13- Feb’14 decline)." - Swissquote Research.

08:50: Geopolitical events likely to prompt knee-jerk reactions

The FTSE 100 has opened higher on Monday and this has prompted a recovery in GBP-EUR which we note as having a correlation with the current risk cycle.

So for this pair, and the commodity currencies (AUD, NZD, CAD) keep an eye on Russia and the Ukraine. David White at Spreadex notes:

"At least for now it would seem the market has already discounted much of present risks, having sent stock indices to their monthly lows last week. Yet as with all ongoing geopolitical concerns, volatility is unlikely to die down completely. Market participants will be sure to employ knee-jerk reactions to any novel information surrounding political commentary, sanctions and military movements. Only the bravest of optimists would consider this particular phase as now over."

08:24: Is Sterling it's own worst enemy?

Turning to the longer-term outlook there remain concerns that the Bank of England will actively seek to keep a lid on the gains in the £. Analysts at UniCredit, in a weekly forecast note, say:

"Sterling bulls will most likely feel like they are caught between a rock and a hard place. On the one hand they are set to take advantage of better growth prospects, but on the other, they may fear that strong sterling appreciation bears the risk of a delay in the first rate hike. Hence,
our best guess for cable is the same as last week, i.e. it will remain strong but not much stronger. As for EUR-GBP we see some leeway to the downside."

08:15: BoE Minutes + Chancellor's budget ahead

In addition to the below-mentioned employment figures there are a couple of other key events to consider in the UK this week:

Next Wednesday there are two important UK events on the agenda. First, the unemployment report, which is expected to be sound.

Second, Chancellor Osborne will deliver his preelection budget.

"We expect the chancellor to announce another round of spending cuts, although these will  not likely take effect until after the 2015 election. Offsetting this, Osborne will be able to bask in the good news that the OBR will have to raise its estimate for 2013 growth, possibly for 2014 too. Third, we expect the BoE minutes to have a dovish tone with a pivotal discussion about the amount of slack in the economy and there is also a good chance that the minutes will consider further sterling appreciation unhelpful, as already outlined by several MPC
members in recent speeches." - UniCredit Bank.

08:05: British pound (GBP) forecasted to remain rangebound

The Monday morning update from Lloyds Bank sees rangebound trading this week with monthly employment numbers dominating the outlook:

"GBP/USD was little moved on Friday, and aside from the brief move above 1.67 on Thursday, GBP has generally traded with a softer tone. Key domestic releases this week will likely have an impact on sentiment towards GBP. The BoE MPC minutes will be of interest however the key highlight of the week will be the labour market statistics.  

"Employment growth is expected to slow. While the majority of forecasters expect the unemployment rate to remain unchanged, our economist forecast a drop back to 7.1%. They also see potential risks of a bigger fall to 7.0%, suggesting potential GBP upside. However, until then we expect GBP to remain relatively range bound."