British Pound (GBP) Outlook Dominated by Inflation, Jobs Data
- Written by: Gary Howes
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The British pound (GBP) has remained firm over the past 24 hours; the outlook is however dominated by looming inflation and job market date. Lloyds Bank are forecasting weakness.
GBP Exchange Rates Today:
- British Pound / Euro exchange rate:1.1974
- British Pound / US dollar: 1.256
- British Pound / Australian dollar: 1.9433
- British Pound / Canadian dollar rate: 1.7689
- British Pound / New Zealand dollar rate: 2.157
- British Pound / South African Rand rate: 22.8541
Today’s UK CPI data could be slightly negative for GBP say Lloyds Bank Research, "since even though a dip to 1.6% is probably temporary, due in part to the late Easter, it will be seen by some as a reason to further delay expectations of the first UK rate hike. In practice, tomorrow’s labour market data is more significant as a barometer of likely rate hike timing."
On Monday we forecasted the GBP to retain a positive bid and we saw some strong gains against the EUR occur.
Traders remain confident the the unit will continue to appreciate with the latest CFTC data showing net longs on sterling have increased while US dollar positioning has now turned net negative.
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Pound euro exchange rate
The euro was hit on Monday as traders took note of a weekend speech made by ECB President Draghi who spoke out against the high valuations seen in the euro exchange rate complex.
The sense is that the strong euro could be targeted by ECB policy makers. However, the ECB is earning a reputation for failing to follow threats with action, and markets are unlikely to panic.
Sean Lee at FXWW sums it up: "If Mario is trying to talk down the EUR, does that mean that he thinks it’s going higher?
I don’t think I’d be selling the EUR on this morning’s comments, in fact I’m tempted to buy it! Let’s wait and see if Europe gives us some decent entry levels in pairs like EUR/NZD or EUR/CAD.?"
Pound to NZ dollar exchange rate
The pound to NZ dollar exchange rate is trading 0.32 pct higher on Monday;
There is no explicit reason for the declines; some have cited technical indicators as being behind the fall while we suspect a correlation with weaker equity markets and geo-political tensions playing a part.
Weakness against the US dollar should also weigh on GBP-NZD:
"The Dark Cloud Cover formation noted in the most recent candlesticks report has resulted in extended weakness for NZD/USD, which follows on from a failure to crack the critical 0.8740 mark last week. While the signal suggests the potential for further declines, traders should be mindful that the uptrend remains intact. A continued pullback is likely to be met by buying support at the 0.8600 handle."
Nevertheless, Citigroup warn that further falls may ultimately materialise going forward:
"Technical Analysis: GBP/NZD may consolidate before falling to 1.9085 and then 1.8871, with resistance at 1.9519."
The technical outlook for the pound sterling
Citigroup Inc reckon: "GBP/USD may test higher to 1.6820-1.6878 (13.05-13.09), with support at 100MA of 1.6510 (12.81)."
Swissquote Bank forecast:
"GBP/USD rebounded from 1.6706. Trend and momentum indicators remain in the green zone yet the enthusiasm is limited before CPI release due on Tuesday. The market expectations are soft. The first line of support is seen at 21 & 50 dma (1.6624/16 resexctively). On the upside, the key resistance stands at the year high of 1.6823 (Feb 17th).
"EUR/GBP crossed below its 50-dma early in the session, the global EUR sell-off being the main trigger. Technicals remain bearish, the pair is still offered below the 21-dma (0.83060)."
Ahead this week
Watch out for inflation data on Tuesday; the Bank of England will come under pressure to bring forward GBP-positive interest rate rises if inflation picks up.
Wednesday is another important day with the latest employment figures due.
Previously the BoE had targeted an unemployment rate of 7%; however unemployment has fallen faster than forecasted and the importance of falling employment has waned.
However, if further falls are shown then we can be assured that the slack in the UK economy that the Bank is ultimately targeting is dissipating.
