British Pound (GBP) Exchange Rate: The Outlook Brightens, Overbought Conditions vs USD Finally End

Above: Mark Carney presents event-risk for sterling exchange rates mid-week with the quarterly inflation report due.

The outlook for the pound sterling (GBP) is positive in the long term however the possibility of near-term pressures exist with important risks coming in the mid-week session.

We are seeing consolidation, and losses against some currencies, on Wednesday: 

• The British pound to euro exchange rate is 0.14 pct higher at 1.2297.
• The pound sterling to US dollar exchange rate is 0.25 pct higher at 1.6867.
• The pound to Aus dollar rate is 0.17 pct lower at 1.7951.
• The pound to Canadian dollar is 0.32 pct higher at 1.8412.
• The sterling to NZ dollar rate is 0.01 pct higher at 1.9508.

If you are holding out for a better exchange rate, then DON'T miss out. You can lock in current rates while taking out the option to transact when your preffered rate is reached. Get in touch with an FCA-regulated specialist and set up an automatic order to capture the best exchange rate you can.

An independent specialist will also fulfil your orders at rates that can be up to 5% more advantageous than your bank will offer. More details on this here.

So while the pound dollar exchange rate may have corrected to more sustainable levels, it seems like there are further gains to be had against the euro.

"EUR/GBP hits a fresh low (0.81551) on GBP/USD rally. The sentiment is comfortably bearish," notes Ipek Ozkardeskaya at Swissquote Bank.

However, analysts at Lloyds Bank warn that the UK currency could come under pressure in the early sessions of this week as there is a lack of data / events to support the unit:

"With little on the UK calendar today and tomorrow, we see risks this may continue. However, there are key domestic releases on Wednesday that looks likely to trigger independent GBP moves."

Bank of England Quarterly Inflation Report Ahead

Mid-week will see two key events for the UK currency, as noted by Lloyds:

"The labour market statistics will be a key focus ahead of the Quarterly Inflation Report. The market forecasts a further improvement in the labour market with the unemployment rate expected to decline for a second successive month to 6.8%.

"This should be GBP positive; however, uncertainty surrounding the QIR could mean GBP upside will be limited. Governor Carney’s comments will be watched closely as he attempts to communicate a revised forward guidance after the unemployment threshold was breached.

"The Governor will have a task on his hands as he attempts to contain the market rate hike expectations given the recent continued improvement in labour market conditions."

Sterling NZ dollar higher

Regarding the pound sterling to NZ dollar, we see GBP/NZD is higher after New Zealand house sales dropped by 20.2% in April (y-o-y), while the house prices increased 0.1% m-o-m (vs. 3.4% a month ago).

"NZD/USD consolidates weakness. A daily close below 0.8648 will suggest deeper downside correction according to MACD analysis. The key support stands at 0.8590 (50-dma). AUD/NZD trend gives bullish signals, a daily close above 1.0816 (21-dma & MACD pivot) will keep the sentiment positive. The key resistance stands at 1.1031 (200-dma)," says Ozkardeskaya.