Pound Sterling Latest: Forecasts Suggest Only a Break Below 1.6780 Could Fail the Upside Move
- Written by: Gary Howes
-
The pound sterling (GBP) is offering the best exchange rates against the US dollar in five years, the question is whether there are more gains to come.
On Friday we note the exchange rate is sliding away from these strong levels after good data out of the US. We would be wary that more USD strength lies ahead.
A look at the pound exchange rate complex as we enter the weekend:
- The sterling dollar exchange rate is 0.15% down at 1.6872,
- The sterling euro exchange rate is 0.08% lower than at last night's close at 1.2171.
- The sterling Aus dollar exchange rate is 0.05% lower at 1.8209.
- The sterling Canadian dollar exchange rate is 0.19% lower at 1.8462.
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Forecasts: Can the pound dollar achieve higher levels?
The technical setup behind the Cable remains constructive with no suggestions that any significant reversal is in the offing.
"Stability above 1.6820 levels keeps the bullish possibility alive especially now that the pair is currently stable above Linear Regression Indicator 34 and 55 in addition to the strong positivity showing on AROON Indicators," says a technical forecast note issued by ICN Financial.
The GBP/USD's MACD cancelled the negative signal almost achieved yesterday and is trading again with slight positivity.
"Only a break below 1.6780 could fail the upside move, but we prefer to remain stable above 1.6780 to strengthen the upside move," say ICN.
Forecasts: Will the euro pound rate remain rangebound?
Concerning the euro pound exchange rate forecast, UBS analyst Maximillian Lin remains bearish on the euro's prospects at this juncture saying:
"Bearish trend is intact and momentum tools are threatening to cross lower, indicating more downside potential to 0.8191 and then to critical
0.8158. Resistance is at 0.8259."
What does the outlook hold for the British pound?
The UK currency was driven higher on Thursday after the first in the May Markit PMI series beat expectations.
Bolstering the case for a U.K. rate hike early next year, Britain’s manufacturing purchasing managers’ index (PMI) improved to 57.3 in April, above forecasts of 55.4 from an upwardly revised 55.8 in March.
On Friday the Construction sector's figure is released while on Tuesday the Services PMI is released.
We will need to see both these numbers come out on the top-side of estimates if we are to see the GBP exchange rate complex rally higher.
Markets: Latest from the US earnings season
Turning to the equity markets, the US earnings season rolls on. These just in:
Dun & Bradstreet (DNB +6.86% to $110.76) said 1Q adjusted EPS of $1.55 vs $1.36 on total revenue of $381.9M, unchanged. The Co reaffirmed its financial guidance for FY14: "Core revenue growth of flat to up 3%, before the effect of foreign exchange; Operating income decline of 5% to 9%, before non-core gains and charges; Diluted EPS decline of 1% to 5%, before non-core gains and charges."
US Steel (X -1.21% to $26.02) swung to 1Q EPS of $0.34 from LPS of $0.51 last year and adjusted EPS of $0.27 vs LPS of $0.35. The Co expects to report a loss for our Flat-rolled segment in 2Q.
Newfield Exploration (NFX +4.99% to $33.85) swung to 1Q EPS of $2.07 from LPS of $0.06 a year ago. Besides, the Co's net production from continuing operations was 10.7 MMB.
