British Pound (GBP) Outlook + Forecasts: Sterling Retains Positive Momentum Despite Wednesday Blip

The pound sterling (GBP) is forecasted to maintain a bullish tone against its major currency counterparts in the week ahead with talk of significant potential M&A action in the pharma sector providing support.

A look at the British Pound (GBP) exchange rate complex on Thursday shows the UK currency has overcome Wednesday's declines; we continue to cautiously back further strength in the UK complex: 

• The pound euro exchange rate is 0.01 pct higher having reached 1.2145.
• The pound dollar exchange rate is 0.07 pct higher at 1.6793.
• The pound Aus dollar exchange rate is 0.24 pct higher at 1.8110.
• The pound NZ dollar is 0.14 pct higher at 1.9576.

PS: The above quotes are taken from the mid-markets; your bank will affix a spread to the rate at their discretion when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more currency. Please learn more here.

According to Shaun Osborne at TD Securities trend and momentum indicators on the GBP-USD are steadily bullish and the bias remains on the upside, a view shared by Swissquote Research:

Concerning a the tricky euro pound rate, "EUR/GBP is heading towards our target at 0.82042 (March 5th low). The support zone is placed at 0.81828 / 0.82000 (30-day lower BB / psychological support)," say Swissquote in reference to the euro pound exchange rate.

A 50 BN USD inflow ahead?

The British pound (GBP) is tipped to see some speculative interest on news of a potential merger/buyout of AstraZeneca by Pfizer.

Commentators say that the potential for 50BN USD worth of inflows into the UK will provide the GBP with a fresh bid.

Boris Schlossberg at BK Asset Management says:

"Another possible reason for pound strength was speculation of a potential bid by Pfizer for UK pharmaceutical giant AstraZeneca. The deal could create a 150B giant, although both companies remain tight lipped about progress in the negotiations.

"Meanwhile currency traders may be trying to get ahead of the news for the possible M&A flow impact on GBP/USD with potential of possible 50B GBP going into the deal."

Forecasts for the pound sterling today

"The important resistance focus is at 1.6878. A break above this would extend the uptrend to 1.7043. Support is at 1.6661," says a morning note issued by UBS.

Concerning the euro pound exchange rate, UBS say: "With the trending and momentum indicators pointing lower, there’s potential for extension of the downtrend to critical support at 0.8158. Resistance is at 0.8260."

Bank of England MPC Minutes ahead

There is little by way of data for the sterling exchange rate complex to get excited by.

We do however have the release of the Bank of England MPC April meeting minutes.

Most commentators expect a neutral tone to be sounded with all members of the MPC expected to be content with the current policy settings; thus the potential impact on sterling should a surprise emerge should be notable.  

Analyst Emmanuel Ng says the pound dollar rate will be supported by this week's Bank of England minutes:

"The BOE MPC minutes this week may shed more light on the authority’s perceived policy posture relative to the market’s reckoning of the first rate hike.

"In recent sessions, we note that the market’s confidence remains palpable with the GBP-USD’s ability to continue to skate near the 1.6800 vicinity.

"In the interim, a 1.6730-1.6845 range may prevail and we stay supported on the pair."

Markets: FTSE 100 opens higher

The FTSE opened up today, after the long Easter break, gave investors the chance to take stock, no pun intended.    

Commenting on the markets today is Farhan Ahmad at TradeNext:

"In early trading the Pharma sector stood out with AstraZenica, Shire and GSK all making early gains on the back of news that two of the biggest players in the sector are making major changes to their business models.  

"GSK has agreed to sell its cancer drugs business to Novartis for $16 Billion, and make a joint consumer health venture with Novartis.  Novartis are in the middle of a major overhaul of their business, and intend to sell their animal health business to Eli Lilly for $5.4 billion.

"Overnight the greenback strengthened against the Yen, for a 7th straight session, its best streak since October of 2012.  

"We can expect the Yen to weaken further as the tightening of monetary policy continues from the FED.  The dollar rose to a high of 102.73 Yen but then fell down to a low of 102.43 at 0718 in London before rebounding to a high of 102.51 at 0733 in London."