GBP to Suffer Choppy Trade Against US Dollar
The pound sterling rose by +0.5% over the course of the past trading week on the back of continued hawkish commentary from BoE Governor Carney and other BoE officials.
However, against the US dollar gains are harder to find courtesy of a similar strong fundamental picture in the United States.
We have heard from analysts that the outlook for the GBPUSD exchange rate suggests sideways action will be preferred, however other key GBP crosses look positively aligned.
At the start of a new week the British pound is positively positioned following on from the strong gains delivered over the course of the previous week.
Across a host of crosses momentum indicators are in buy territory and at this stage we see little reason to bet against the trend.
However with little on the data calendar over the next couple of days we would expect some profit-taking on recent moves as markets deal with over-bought conditions.
Looking at what the currency markets are offering at the present time we note GBP/EUR: Spot is seen at 1.4360, banks offer around 1.3958, independents around 1.4188.
Turning the equation around, EUR/GBP is seen at 0.6961 while more gains have taken the GBP/AUD up to 2.1130.
GBP/NZD is noted at: 2.3731, if you wish to see further bank / independent comparisons on the mentioned pairs please navigate via here.
On the data front the Rightmove house prices (July) were still fairly strong at 0.1% M/M and 5.1% Y/Y (from 4.5%). Of late, sterling often profited from strong eco data, especially against the single currency. However, this time, there were no additional gains.
On the contrary, in calm trading, sterling fell prey to some moderate profit taking both against the dollar and the euro.
Cable dropped from the 1.5600/20 area at the start of trading to an intraday low in the 1.5540 area late in the morning trade.
GBP Choppy, BoE Minutes Watched
Central bank policy will remain central to direction in foreign exchange particularly as we face a thin calendar and little by way of Greek risk.
BofE Gov Carney has also made optimistic comments of rates starting their slow normalisation process around the turn of the year.
“This brings anything from November to February into focus, and has given the GBP another wave of buying support.
"GBPUSD should remain in a choppy range now, with GBP outperforming in the crosses. EURGBP is expected to broadly remain under pressure with technical support at .6940/30,” say Lloyds Bank in a currency market note to clients."
Minutes from the July RBA meeting and the June BOJ meeting that will be released on Tuesday morning will provide some fuel for this debate.
“The more up-to-date Australian minutes will be of more interest. In particular any information these provide on how much further the RBA would like the Aussie dollar to slide,” say Lloyds.
The Japanese minutes, which are for the last but one meeting are more out of date but could still provide some evidence of whether the BoJ is likely to ease policy further.
The USD has once again latched onto recent upbeat comments from Fed Chair Yellen far more than the US rates markets have and so we remain a little wary of how far the USD can push on its own.
“EURUSD is a favourite speculative market short and we are testing recent interim range lows at 1.0825-1.0800, ahead of the 1.05/1.0450 lows set earlier this year. We remain biased for a gradual move to those lows, with technical resistance lying at 1.0910/65 and then 1.1075/1.1100,” say Lloyds.
