Pound Sterling Exchange Rates Firm, Bargain Hunters Abound

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. 

By Rob Samson

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17:46: The GBP-EUR to average 1.19 until December 2015

New research in from UniCredit Bank. Are you hoping for higher GBP-EUR rates? UniCredit warn that the rates we are currently seeing are the best we are going to get:

"It has long been our belief that the appreciation of the euro is, and will continue to be, driven by greatly improved confidence in the euro area. At the same time, we think there is little the ECB can do to prevent EUR from strengthening: another cut in the refi rate and/or a funding-for-lending scheme are unlikely to have lasting impacts on the currency. Only full-blown QE (purchases of government bonds) could deliver a blow to the EUR, but this is highly unlikely, especially in an environment of improving growth."

The GBP-EUR is forecast at 1.19 until September 2015. Consider that the average forecast amongst leading banks for the GBP-EUR by year-end 2014 is 1.25.

15:28: Citi see uptrend resuming

Citi have today called a return to form for GBP-USD:

"The BOE will likely raise rates in Q4 2014, amid upbeat U.K. economy outlook. Technically, GBP/USD begins to rebound from the uptrend channel bottom and RSI also recovers from oversold region. The pair will likely resume uptrend to 1.6823, with support at 1.6439-1.6453."

14:04: £ enjoying strong gains

The pound is testing 1.2 against the euro once more while against the USD the unit is 0.12 pct higher at 1.6550. Recoveries are being seen elsewhere with GBP-CAD now slightly higher after a poor morning's trade. The GBP-AUD is however still deep in the red, however any currency that manages to pull one off against the Aussie will be considered lucky; the AUD is today's strong-man once again.

Global stocks remained in positive territory on high hopes China will introduce stimulus to counter the slowdown in its economy. US equities opened positively with the Dow Jones trading 80 points higher following US Durable Goods Orders coming in much better than expected at 2.2%, beating the 1.1% estimate.

13:38: "We plan to sell the pair again"

Analysts at Gainsy tell us which levels in GBP-USD could trigger a fresh decline:

"GBP/USD bottomed out at 1.6470 which represents 61.8% Fib retracement of February's advance between 1.6252-1.6823, along with a bullish trend line from November lows cuts through this region which could limit the downside in the near term. However, the subsequent bull attempt found a stiff resistance at the upper Fibonacci level at 1.6537.

"Meanwhile, the traditional “measured move” method of projecting the target of the double high pattern seen on the daily chart would point toward a possible move toward 1.6350/400. We plan to sell the pair again on the clearance of 1.6450 which had formerly offered decent support and resistance in the past."

12:20: Next resistance at 1.6568

Sterling is firm at mid-day.

Concerning the next obstacles, Luc Luyet at Swissquote Research says:

"GBP/USD is bouncing near the support implied by its rising channel. Hourly resistances are given by 1.6568 (see also the declining channel) and 1.6666. Supports can be found at 1.6460 and 1.6252 (05/02/2014 low). 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)."

EUR-GBP stalemate persists

Concerning the range being experienced in EUR-GBP, Piet Lammens at KBC Markets sees a stalemate:

"EUR/GBP is hovering in a tight range between 0.8320 and 0.84 and the pair is now again in the middle of that range with no trigger available for a break either way. Later this week, the UK retail sales (tomorrow) and consumer confidence (Friday) are released. Will they unlock the current stalemate? Not evident."

10:10: Sell the GBP-USD

Today's recommended trade from FuturesTechs is a sell on GBP-USD. More here.

10:05: Martin Weal gives temporary support

BoE member Martin Weale has today noted that:

"We are starting to see is that wage growth is starting to pick up and that's very encouraging because there has been a squeeze on wages and for growth to be sustained we do need income and wages to be rising."

"Obviously, as the economy recovers, the interest rate isn't going to stay at half a percent indefinitely."

That comment caused a brief spike in GBP-USD taking the pair through the 1.6550 level, but it retraced some of its gains as trading progressed in London reiterating just how little enthusiasms there are in the markets at present.

09:34: Aus dollar looking lethal

The big gun in global FX at the moment has to be the Aus dollar, as recounted by FX brokerage Afex:

"The Aussie dollar rose after Reserve Bank Governor Glenn Stevens said there are early signs of a transition from mining-led demand growth to domestic consumption and that the economy may strengthen later this year. In response to questions after a speech in Hong Kong today Stevens said the Aussie’s direction depends on investors’ view of the South Pacific nation’s fundamentals.

"The EUR was near the lowest in three weeks versus the USD as weaker European business data fuelled speculation the region’s economic recovery will falter, while analysts predict US reports this week will show gains in durable goods orders and faster growth."

08:36: EUR-GBP most likely place for GBP gains

We are seeing gains for the UK unit. Lloyds Bank comment:

"GBP managed a better performance yesterday even though the CPI data was essentially in line with expectations, and GBP/USD continues to look well supported below 1.65, but EUR/GBP was the bigger mover yesterday, with GBP/CHF showing the biggest move of all. These continue to look like the most likely places for GBP to make gains based on rising UK yields in the coming months, as the prospect of rate hikes remains distant in the Eurozone and Switzerland and the CHF is also undermined both by its expensive valuation and the SNB’s 1.20 floor on EUR/CHF.

"However, there is nothing on the UK calendar today, so independent GBP moves seem unlikely. Nevertheless, a break of the 0.8330 level in EUR/GBP would be encouraging for GBP bulls, with 0.8280 achievable in the near term."

07:27: Buy these cheap GBP-USD levels

The March slump has offered buyers some cheaper sterling valuations says Sean Lee at FXWW who today comments:

"GBP/AUD has continued to break lower but with Fibo support at 1.6470 having held very well, I definitely favour buying dips in cable.

"I’d suggest 1.6505 as the initial support level with obvious levels below that at 1.6470. My topside target is still 1.6650."

07:22: Sterling weak on Wednesday

A soft start for the UK currency on Wednesday. There has simply been no desire to send the currency higher in the month of March, and the theme for today will likely be more of the same. Yesterday's CPI gave something of a lift but the boost has proven to be short-lived.

07:15: The pound vs the EUR and USD today

There is little to look forward to today from the Eurozone, so expect a hangover from yesterday's Weidmann comments (See 13:51 entry) to continue to influence GBP-EUR. The recovery from the low 1.19's to just below 1.20 was impressive, can the momentum continue? We would suggest it will take noticeably better-than-expected news on the UK economy to propel such a move, and with little on the economic docket today we may have to wait a while for such a breach.

For GBP-USD look to the Durable Goods Orders (Feb) data due at 12:30PM. Analysts are looking for a reading of +1%, better than the previous month's -1%.

Exchange rates this morning

In early morning trade in London we see:

The pound euro exchange rate is 0.05 pct higher at 1.1962.
The pound dollar exchange rate is 0.09 pct lower at 1.6515.
The pound Australian dollar exchange rate is 0.47% down at 1.7964.
The pound Canadian dollar rate is 0.25 pct down at 1.8422.