British Pound Exchange Rates Could Simply 'Give up the Ghost' if Today's Data Fails to Deliver
- Written by: Gary Howes
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The British pound (GBP) is, like the broader FX market-place, stuck in a tight range and appears unwilling to budge. BUT - there are risks ahead.
First, a look at the marketplace shows the currency is firmly entrenchted at recent levels:
- The pound sterling to euro exchange rate is 0.01 pct lower at 1.2137.
- Against the US dollar sterling is 0.06 pct lower at 1.6793.
- The pound sterling Aus dollar exchange rate is 0.13 pct lower at 1.8116.
- The pound sterling to NZ dollar is 0.19 pct lower at 1.9580.
- Against the Canadian dollar the pound is 0.09 pct higher at 1.8533.
Please keep in mind that all quotes here are mid-market. Your bank or payment provider will affix a spread to the rate at their own discretion.
Hence, your currency rate is often far off the mark. An independent provider will however actively seek to get you closer to the market rate, thus delivering up to 5% more currency in many cases. Please learn more here.
Risks on Friday
As noted in our more expansive piece on Friday's agenda, there are risks that the GBP simply gives up trying to fight the hefty resistance levels seen across the complex.
For instance, an advance beyond 1.22 against the euro appears to be fantasy while at this stage a minor economic miracle will be needed to shunt the GBP-USD beyound 1.70.
If today's retail sales disappoint traders could 'give up the ghost' and unwind their extensive long exposure on GBP. We could see a quick run lower.
Pound against the euro
Wednesday provided little domestic news for sterling and all pressures were external, as can be noted in the gains made against the Australian dollar.
External drivers will be important today, particularly against the euro as we have some German data due (IFO business climate) and the ECB's President Draghi is due to speak at 11 BST.
Concerning the EUR/GBP's technical outlook, Karen Jones at Commerzbank says:
"EUR/GBP has seen an initial recovery off its .8192 end of February low. The 13 counts on the intraday charts suggests that this will hold the initial test for a rebound to .8271/91. We would allow for a minor dip to .8225 ahead of a move to .8271/94, where we expect the market to fail.
"Current Position: Long .8207 Recommended trade: Raise the stop from .8190 to a .8215 profit stop. Exit .8270."
Pound against the dollar
"US data this afternoon may have a greater impact on GBP/USD, but we expect last week’s high of 1.6842 to remain good initial resistance," say Lloyds Bank research.
Craig Erlam at Alpari UK warns:
"Sterling is really struggling around 1.6820 right now having reached the 123.6 fib expansion level, which happened to coincide with a previous resistance level, dating back to 17 February. Numerous attempts to significantly break through this level have failed which suggests the bullish move may be running out of steam."
Pound sharply lower vs the NZ dollar
The NZ dollar is one of the winners on Thursday after the New Zealand central bank hiked interest rates overnight.
In a move that was largely expected the RBNZ raised the cash rate to 3%, taking NZD/USD to a high of 0.8623.
Commenting on the move is Chris Weston at IG:
"The market will now place even more emphasis on the exchange rate and should act as a natural headwind should the pair continue its longer-term trend higher and onto 90 cents.
"Traders will also be paying close attention to future inflation reads, given the slight softness in the Q1 print.
"The Q2 inflation print comes out on July 16, so traders and economists will continue to focus closely on the key inputs that feed into this print and any thus weaker data will cause the NZD to fall fairly heavily, as rate hike expectations get priced out."
