British Pound (GBP) on 13/01: Sterling Hammered Lower - Today's Currency News, Forecasts and Commentary
- Written by: Gary Howes
-
- Last Updated: 07 April 2014
Updated: The British Pound (GBP) is stable as we move into the second week of April. Selling on global equity markets has seen some relief being enjoyed against the commodity dollars. Meanwhile, we continue to see consolidation vs the Euro and US dollar.
This period of consolidation will inevitably give the sterling bulls hope that the 2014 rally can ultimately reassert itself.
For the latest, see our live coverage section. For the archived material you clicked for, please scroll down.
By Gary Howes
Latest exchange rates
- £ vs Euro:1.2024
- £ vs Dollar:1.2532
- £ vs Australian Dollar:1.9231
- £ vs Canadian Dollar:1.7483
- £ vs New Zealand Dollar:2.1478
- £ vs Rand:22.7019
16:50: Sterling momentum fades, all eyes on tomorrow's inflation data
KBC Markets say markets are clearly turning more clearly more cautious on the UK currency:
"Sterling remained on the defensive, even as there were hardly any ecodata from the UK. The dollar regained part of Friday’s losses, both against sterling and the euro. However, this time the euro outperformed the UK currency in this move. Two intraday selling waves hit the UK currency. EUR/GBP is changing hands in the 0.8340 area at the moment of writing.
"Recent less buoyant UK eco data might have installed a short‐term sell‐on‐upticks bias amongst sterling longs. There was also market chatter on M&A related activity in thin market conditions. The inability of cable to return to the 1.66 reaction top also suggests some fatigue on the recent UK rally.
"Whatever the reason for today’s moves in sterling, the market momentum is clearly turning more cautious on the UK currency. The UK data later this week (CPI, tomorrow/ retail sales on Friday) might help to decide whether the current correction has further to go."
"Sterling remained on the defensive, even as there were hardly any ecodata from the UK. The dollar regained part of Friday’s losses, both against sterling and the euro. However, this time the euro outperformed the UK currency in this move. Two intraday selling waves hit the UK currency. EUR/GBP is changing hands in the 0.8340 area at the moment of writing.
"Recent less buoyant UK eco data might have installed a short‐term sell‐on‐upticks bias amongst sterling longs. There was also market chatter on M&A related activity in thin market conditions. The inability of cable to return to the 1.66 reaction top also suggests some fatigue on the recent UK rally.
"Whatever the reason for today’s moves in sterling, the market momentum is clearly turning more cautious on the UK currency. The UK data later this week (CPI, tomorrow/ retail sales on Friday) might help to decide whether the current correction has further to go."
16:14: Look to sell rallies in EUR/GBP
Shaun Osborne at TD Securities says the move higher in EUR/GBP is part of a corrective rally and traders should be prepared for when the trend lower reasserts itself:
"EURGBP eased below the 0.8464/0.8255 double top trigger yesterday but the move stalled and reversed strongly today. Daily price action suggests a minor low in place for the EUR now—a morning star reversal right around key support—so we may have to allow for some corrective gains in the cross near-term (low/mid 0.83s).
"But the overall track lower should persist, keeping gains relatively limited. We note that daily and weekly trend momentum signals are still bearishly aligned, so gains should remain limited. Look to sell rallies."
"EURGBP eased below the 0.8464/0.8255 double top trigger yesterday but the move stalled and reversed strongly today. Daily price action suggests a minor low in place for the EUR now—a morning star reversal right around key support—so we may have to allow for some corrective gains in the cross near-term (low/mid 0.83s).
"But the overall track lower should persist, keeping gains relatively limited. We note that daily and weekly trend momentum signals are still bearishly aligned, so gains should remain limited. Look to sell rallies."
16:08: Momentum pointing lower for GBP
Matthew Weller at GFT warns of further losses in the pound dollar exchange rate courtesy of the break-down in GBP technicals:
"While its mainland cousin has merely consolidated in slow trade, the GBP/USD has seen a sharp reversal off the 1.6500 level already this week. Rates rallied up to test that level in the first few hours of trade, but a large 4hr Bearish Engulfing Candle warned of an imminent downside reversal.
"At this point, the momentum is pointing to the downside for a possible continuation toward the 1.6400 handle next. More aggressive traders may want to consider intr-aday sell trades, targeting that level, though the stop loss placement may be a bit subjective."
"While its mainland cousin has merely consolidated in slow trade, the GBP/USD has seen a sharp reversal off the 1.6500 level already this week. Rates rallied up to test that level in the first few hours of trade, but a large 4hr Bearish Engulfing Candle warned of an imminent downside reversal.
"At this point, the momentum is pointing to the downside for a possible continuation toward the 1.6400 handle next. More aggressive traders may want to consider intr-aday sell trades, targeting that level, though the stop loss placement may be a bit subjective."
14:45: All eyes on inflation data
Christopher Vecchio at FXCM says upcoming inflation data will be critical for sterling in light of the current selling pressure:
"The British Pound enters the coming period with a more uncertain future. Central to Sterling weakness has been budding expectations for a dovish shifting in the Bank of England’s forward guidance policy - the Unemployment Rate threshold would be lowered to 6.5% from 7.0%.
"Ironically, this is a result of recent economic momentum, as it looks like the UK Unemployment Rate will hit 7.0% sometime in early-2014. The BoE is worried that higher rates resulting from a stronger economy will be self-defeating; right or wrong, it is attempting to front-run an accelerated tightening cycle.
"Accordingly, because the BoE needs a soft price environment in order to justify a dovish shift in policy – the desire to keep rates low so as to not choke off growh - we are watching this Tuesday’s December UK Consumer Price Index release with great anticipation.
"Confirmation that inflation remains pinned below the BoE’s +2.5% (y/y) forward guidance circuit may be the signal for a dovish shift at the February meeting – and that may be setting up the GBPAUD and GBPJPY for technical corrections in the coming days."
"The British Pound enters the coming period with a more uncertain future. Central to Sterling weakness has been budding expectations for a dovish shifting in the Bank of England’s forward guidance policy - the Unemployment Rate threshold would be lowered to 6.5% from 7.0%.
"Ironically, this is a result of recent economic momentum, as it looks like the UK Unemployment Rate will hit 7.0% sometime in early-2014. The BoE is worried that higher rates resulting from a stronger economy will be self-defeating; right or wrong, it is attempting to front-run an accelerated tightening cycle.
"Accordingly, because the BoE needs a soft price environment in order to justify a dovish shift in policy – the desire to keep rates low so as to not choke off growh - we are watching this Tuesday’s December UK Consumer Price Index release with great anticipation.
"Confirmation that inflation remains pinned below the BoE’s +2.5% (y/y) forward guidance circuit may be the signal for a dovish shift at the February meeting – and that may be setting up the GBPAUD and GBPJPY for technical corrections in the coming days."
14:41: EUR/GBP flows behind dramatic collapse in GBP
Steve Collins, Global Head of Dealing at London & Capital Asset Management says heavy flow demand is driving sterling lower today:
"Significant flows in EURGBP behind this GBP weakness."
"Significant flows in EURGBP behind this GBP weakness."
14:04: GBP plummets
Traders are unwinding their GBP longs in quick succession at present.
GBP/EUR is half a percent in the red having broken below 1.2 - an incredible fall from grace. GBP/USD is an eye watering 0.7 pct lower at 1.6370.
"The GBP/USD broke through the 1.6420/00 support area, triggering stops and sliding to its lowest level in a week at 1.6360 so far. At time of writing, the Cable is trading at the 1.6365 area, recording a 0.7% loss on the day. The GBP is among the worst performers against the dollar, having erased Friday's gains despite the greenback remains weighed by weak NFP data." - FX Street.
GBP/EUR is half a percent in the red having broken below 1.2 - an incredible fall from grace. GBP/USD is an eye watering 0.7 pct lower at 1.6370.
"The GBP/USD broke through the 1.6420/00 support area, triggering stops and sliding to its lowest level in a week at 1.6360 so far. At time of writing, the Cable is trading at the 1.6365 area, recording a 0.7% loss on the day. The GBP is among the worst performers against the dollar, having erased Friday's gains despite the greenback remains weighed by weak NFP data." - FX Street.
12:44: NZD to outperform GBP warn Citigroup
For those with an eye on GBP vs the NZD we have this flash from Citigroup:
"NZD may outperform on expectation of rate hike in March by the RBNZ. Technical Analysis: GBP/NZD may drop to 1.9634, with resistance at 2.0028."
"NZD may outperform on expectation of rate hike in March by the RBNZ. Technical Analysis: GBP/NZD may drop to 1.9634, with resistance at 2.0028."
12:41: Buy GBP/USD say Danske
A flash call from Danske Bank:
"BUY GBP/USD AT 1.6455 FOR A 1.6605 OBJECTIVE; STOP AT 1.6370."
"BUY GBP/USD AT 1.6455 FOR A 1.6605 OBJECTIVE; STOP AT 1.6370."
12:17: UniCredit urge caution on GBP
Today's FX insights from UniCredit Bank:
"Cable did continue to hold the line above 1.6450, helped by poor US labor data, despite disappointing IP data at home. Yet, we would remain cautious about riding a strong rally well above 1.65.
"The lower net US job creation in December lifted EUR-USD, but a full break above 1.3700/50 and towards recent highs close to 1.39 still looks challenging. The prospect of liquidity injections by the ECB is likely to keep the upside potential limited for now, in our view.
"The disappointing US NFP report offered an excuse for the AUD to rally closer to 0.90. Yet, with a very determined RBA to keep the AUD lower and softer data out of China, we would chose to fade any rally above 0.90. With the OIS curve having gone from downward sloping to being virtually flat the scope for disappointment is significant."
"Cable did continue to hold the line above 1.6450, helped by poor US labor data, despite disappointing IP data at home. Yet, we would remain cautious about riding a strong rally well above 1.65.
"The lower net US job creation in December lifted EUR-USD, but a full break above 1.3700/50 and towards recent highs close to 1.39 still looks challenging. The prospect of liquidity injections by the ECB is likely to keep the upside potential limited for now, in our view.
"The disappointing US NFP report offered an excuse for the AUD to rally closer to 0.90. Yet, with a very determined RBA to keep the AUD lower and softer data out of China, we would chose to fade any rally above 0.90. With the OIS curve having gone from downward sloping to being virtually flat the scope for disappointment is significant."
11:26: Take advantage of these good GBP rates
Despite the poor-form in GBP seen over the course of the past two trading sessions analysts at Currency Index remind us we are still seeing some strong levels worth taking advantage of:
"The pound is demonstrating its current strength with particularly good buying levels across a range of currencies – USD, CAD, SEK and ZAR to name but a few. In general the pound is strong across the board at present so any of you with upcoming currency requirements may like to take advantage of these excellent rates now."
"The pound is demonstrating its current strength with particularly good buying levels across a range of currencies – USD, CAD, SEK and ZAR to name but a few. In general the pound is strong across the board at present so any of you with upcoming currency requirements may like to take advantage of these excellent rates now."
10:36: More downward pressure on the pound
Boris Schlossberg at BK Asset Management says markets are now betting that the pressure on the Bank of England to ease policy has lifted somewhat: "The drop in cable may be due to the reassessment of UK growth in Q1 this year. We noted on Friday that the latest economic data from the British Isles suggests that growth may have peaked as last year came to a close and if that indeed proves to be the case then expectations of any further tightening by the BoE will dissipate putting downward pressure on the pound."
09:51: Aus dollar risk remains high
The Australian dollar has recovered in violent fashion against the British pound and other major currencies. But, beware, volatility in this currency must not be ignored.
"Technically, AUDUSD has significantly cleared resistance at the Oct-Dec downtrend channel top. The short-term technicals suggests further gains vs. USD, while the sentiment against other majors (especially NZD and GBP) remains fragile. Traders should keep in mind RBA’s commitment for weaker Aussie – event risk is high." - Swissquote Research.
"Technically, AUDUSD has significantly cleared resistance at the Oct-Dec downtrend channel top. The short-term technicals suggests further gains vs. USD, while the sentiment against other majors (especially NZD and GBP) remains fragile. Traders should keep in mind RBA’s commitment for weaker Aussie – event risk is high." - Swissquote Research.
08:56: GBP strength may be transient going forward
Emmanuel Ng at OCBC Bank is another exchange rate forecaster warning of further pound sterling malaise:
"The GBP-USD stumbled on disappointing November industrial production numbers but the subsequent pull from the broad dollar saw the pair reversing course. Going ahead, strength in the pair may prove transient if the UK data stream continues to disappoint. Note that on the CFTC front, net GBP longs were also reduced slightly in the latest week and any failure to retake the 1.6500/20 area may confine the pair lower towards 1.6400 multi-session."
"The GBP-USD stumbled on disappointing November industrial production numbers but the subsequent pull from the broad dollar saw the pair reversing course. Going ahead, strength in the pair may prove transient if the UK data stream continues to disappoint. Note that on the CFTC front, net GBP longs were also reduced slightly in the latest week and any failure to retake the 1.6500/20 area may confine the pair lower towards 1.6400 multi-session."
08:49: Sterling loses its shine, more losses forecasted
The British Pound (GBP) has gone from 'hero to zero' in swift fashion.
"Weaker industrial production data on Friday has taken a little of the shine off sterling, particularly relative to the EUR where the November production data have generally been encouraging. Short term UK yields fell in line with US yields on Friday, and against this background it now looks difficult to achieve any further extension of EUR/GBP weakness in the absence of more data," say Lloyds Bank Research.
According to Lloyds, "The 0.83-0.8320 area should nevertheless provide good resistance to a EUR/GBP recovery ahead of this week’s CPI and retail sales data. However, weakness in retail sales as suggested by some surveys could see a more extended reversal of the recent EUR/GBP decline. For today, there is little on the calendar that seems likely to trigger significant movement."
"Weaker industrial production data on Friday has taken a little of the shine off sterling, particularly relative to the EUR where the November production data have generally been encouraging. Short term UK yields fell in line with US yields on Friday, and against this background it now looks difficult to achieve any further extension of EUR/GBP weakness in the absence of more data," say Lloyds Bank Research.
According to Lloyds, "The 0.83-0.8320 area should nevertheless provide good resistance to a EUR/GBP recovery ahead of this week’s CPI and retail sales data. However, weakness in retail sales as suggested by some surveys could see a more extended reversal of the recent EUR/GBP decline. For today, there is little on the calendar that seems likely to trigger significant movement."
