GBP/EUR Exchange Rate Could Make a Comeback
- Last Updated: 03 April 2014
Updated: The GBP exchange rate complex has come under pressure once 
more at the start of April with the entire Markit PMI series missing the mark. However, many analysts continue to consider the latest price action as being representative of consolidative price action.
April will be pivotal for the UK unit - can the uptrend reassert itself or will we continue to see more of the same?
Keep in touch with our Live Coverage Here. For the archived material for the day in question please scroll through please scroll down.
- Last Updated: 03 April 2014
Updated: The GBP exchange rate complex has come under pressure once more at the start of April with the entire Markit PMI series missing the mark. However, many analysts continue to consider the latest price action as being representative of consolidative price action.
April will be pivotal for the UK unit - can the uptrend reassert itself or will we continue to see more of the same?
Keep in touch with our Live Coverage Here. For the archived material for the day in question please scroll through please scroll down.
- Pound Euro Exchange Rate:1.2024
- Pound Dollar Exchange Rate:1.2532
- Pound Australian Dollar Exchange Rate:1.9231
- Pound Canadian Dollar Rate:1.7483
- Pound New Zealand Dollar Rate:2.1478
- Pound Rand Exchange Rate:22.7019
19:09: Inflation to ease on a stronger GBP, retail sales up firmly
We are already turning eyes to next week. This note from the team at UniCredit on the impact a stronger sterling will have on inflation:
"Next Tuesday, we expect February CPI inflation to have fallen 0.1pp to 1.8%, largely on the back of sterling appreciation. More specifically we see a significant negative contribution from petrol prices (which fell 0.6% mom in February compared to rising 3.1% mom in the same month of last year) and retail prices (the BRC shop price index fell to -1.4% yoy in February from -1.0% yoy in January)."
Also next week on Thursday, UniCredit expect retail sales (including automotive fuel) to rise 0.7% mom, partly reflecting a bounce back from January’s 1.5% mom fall.
"If so, on a three-month-over-three-month basis retail sales will be up a very healthy 1.5%, thus further underpinning the strong cyclical backdrop of the UK economy."
16:44: Pound's fall vs dollar predicted to be limited
"Cable (the GBP/USD currency pair) has continued the recent move lower, after topping and turning at 1.6823 on Feb. 17 on the back of a more hawkish Fed at yesterday’s Federal Open Market Committee meeting, but perhaps not to the extent that other currencies have fared. General consensus is still for the Bank of England to be on the road to raising rates sooner than some of its counterparts and that should help keep the pound’s fall limited." - Jean-Pierre Doré at Western Union.
16:30: GBP-CAD hits fresh cycle highs
The move higher against the commodity currencies continues. GBP-CAD in particular is doing well:
"The GBP/CAD is a different story, with the pair hitting a fresh cycle high at 1.8647 today. The pair has been consolidating since peaking at 1.8644 on Feb. 21 and unless the BoC changes its dovish stance, it looks like the GBP/CAD is headed higher," says Jean-Pierre Doré at Western Union.
15:40: With a base formation broken, more upside lies ahead for the EUR-GBP
Despite recent declines in the EUR-GBP, we cannot yet rule out further gains. As noted by MIG Bank in today's forecast:
"EUR/GBP has thus failed to break the resistance at 0.8405 (25/12/2013 high). However, the technical structure favours a move towards the key resistance at 0.8467 as long as the support at 0.8321 (11/03/2014 low) holds. An hourly support lies at 0.8342 (17/03/2014 low).
"In 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)."
15:26: Sell GBP-USD
ICN Financial have recommended a sell on GBP-USD:
"Sell the pair below 1.6550 targeting 1.6515, 1.6470, 1.6390 and stop-loss above 1.6625.
"The pair declined yesterday and is trading stably below 1.6600 levels which is negative, while the upside move will return if the pair breached 1.6670.
"Linear Regression Indicators became more negative and MACD is moving further to the downside in addition to strengthening bearishness showing on AROON Indicator. Therefore, we expect today further bearishness. Of note, breaking 1.6470 is significant to push the pair further to the downside as will be explained in our next report."
13:39: Lloyds Bank see gains in GBP-EUR
Lloyds Bank Research are bullish on the pound's prospects against the Euro:
"The strength of the USD after the FOMC meeting has had little impact on crosses, but the tendency of UK yields to move with US yields and the relative similarity of the cyclical position suggest there should be potential for EUR/GBP declines from here.
"If anything, today’s CBI industrial trends survey and the speech from Weale (hawkish bias) also suggest some GBP upside against the EUR. We look for a move towards 0.8325 in EUR/GBP and 1.6470 in GBP/USD."
11:56: Don't underestimate the Euro's strength
A stark warning from UniCredit Bank:
"We have long been arguing in favour of EUR strength, as part of our 'normalisation theme' which we first introduced in late 2012. As reality has unfolded in line with our expectations and as EUR-USD is gaining momentum faster than we even thought, we raise our 2014-end forecast."
11:21: Is this a watershed for the US dollar?
Stephen Gallo at BMO Capital gives us insights into this morning's session:
"During the London morning, it appeared as if the broader market was grappling with the notion of whether the latest events are a ‘watershed moment’ for the USD. The FX options market, so far, is saying ‘not really’, but key nominal rate spreads acting in support of the USD have not backed off either. The shock out of ‘complacent positioning’, particularly in the US curve, has also given the move in FX some ‘staying power’. This adjustment will probably need supporting key US data to convincingly shift it into a ‘watershed’, but we expect the firmer USD tone to stick with us until that point."
10:18: Is the Cable bull-run about to be negated?
Important times for the headline pound dollar exchange rate. As noted by Luc Luyet at MIG Bank:
"GBP/USD made new lows yesterday and is now approaching the support implied by the rising channel (around 1.6454). Hourly resistances are given by the shorter term declining channel (around 1.6636) and 1.6666.
"In the longer term, a break to the downside out of the rising channel would negate the current bullish bias implied by the break of the resistance at 1.6668 (24/01/2014 high). A strong horizontal support stands at 1.6220 (17/12/2013 low)."
09:12: Outlook for GBP-USD turning bearish
The issue of renewed US dollar strength is drawing much focus today. The latest technical forecasts from FuturesTechs confirms the outlook is turning bearish. Full details here, graph below:
08:55: Euro still looks bullish vs £
Despite a recovery in the pound to euro seen over the past 24 hours UBS confirm they favour the latter. Their latest communication to clients on the EUR-GBP says:
"With bullish trend in place, there’s scope for extension of the recent strength to 0.8405, a break above this would open the way to 0.8467. Any setback in the interim will be limited to support at 0.8308."
08:06: Why is Sterling strong today?
The sterling exchange rate complex has benefited over the past 24 hours from good domestic data. Boris Schlossberg at BK Asset Management fills us in:
"The UK claimant count printed at -34.6K much better than the -25K eyed as unemployment rolls were reduced further. The prior reading was upgraded as well to -33.9K from -27.6K initially reported. The unemployment rate remained steady at 7.2%. Overall, this was another very impressive report made more so by the rise in average wage earnings which increased by 1.4% versus 1.3%.
"The rise in wages continues to lag the rise in inflation but both gauges are moving in the right direction with wages increasing while inflation continues to decline. That dynamic should prove supportive to cable bulls who are betting that the BoE will be the first G-7 central bank to hike rates in more than 5 years."
08:04: Sterling is second-best performing currency
On Wednesday the UK unit was the second-best performer on global FX as the UK employment market was shown to have improved at a faster-than-expected pace. In addition, it was also shown that living conditions were improving as pay rises grew faster than expecting suggesting the slack in the UK economy is falling away - something the Bank of England wants to see before raising interest rates.
The best performer, as outlined below, was the US dollar.
Overnight: Yellen's message boosts the US dollar, sinks AUD, NZD, CAD and ZAR
The big driver for foreign exchange markets on Thursday is the overnight communication coming from the US Federal Reserve.
Chair Janet Yellen last night began to set expectations for tightening, a move that sent the commodity currencies lower and the US dollar higher.
The GBP-CAD, GBP-AUD, GBP-NZD and GBP-ZAR have all moved higher in sympathy.
"If the Fed maintains its current pace of tapering, asset purchases will cease in the fall, which means that the first rate hike will be in the summer of 2015. This timing is consistent with the forecast of Fed officials, 80% of whom expect the first rate rise next year. The fact that Janet Yellen is talking about rate hikes at all in her first meeting as Federal Reserve Chair is extremely bullish for the dollar and providing specifics on timing gives investors a target to look forward to," says Kathy Lien at BK Asset Management.
