British Pound Sterling Live on Monday the 9th: GBP and EUR tipped to lose further ground to USD

Modified: Tuesday, 09 July 2013 08:35 BST
Written by: Will Peters

city of london and sterling today
On Monday morning we see sterling has been unable to recover the losses recorded on the last two days of last week. In the absence of any major UK data releases we digest the latest forecasts and views on sterling following Mark Carney's emphatic start to his tenure at the Bank of England.

18:23: Outlook for sterling on Tuesday the 9th

Monday gave the British pound little domestic data to grab onto. Tuesday will be different.

@ Midnight, The British Retail Consortium (BRC) Retail Sales Monitor is released. Analysts are forecasting a reading of 3 pct, up from last months 1.8 pct.

@ Midnight, The RICS Housing Price Balance survey. Analysts are looking for a reading of 10 pct.

At 9:30 we get the juicy stuff.

@ 9:30, UK Industrial Production data is released by the National Statistics, this ONS measures outputs of the UK factories and mines. Year on Year data for May will be important for GBP. Analysts are forecasting a reading of -1.5 pct.

@ 9:30, Manufacturing Production (YoY) (May). Consensus is for -1.6 pct.

@ 9:30, Goods Trade Balance (May). £-8.470B Consensus.

BUT, the highlight of the day comes in the afternoon.

@ 15:00, NIESR GDP Estimate (3M) (Jun). "The GDP Estimate released by the National Institute of Economic and Social Research is an estimate of growth over the last 3 months up to the report which comes out a month before the official announcement. The report is highly reliable and would influence the UK monetary policy," say Oanda.

The previous month saw a reading of 0.6 pct.

18:11: US dollar strength is the FX story of this Monday

Kathy Lien at BK Asset Management:

"The recent rally in the U.S. dollar has taken the greenback to fresh highs against many of the major currencies. The euro and British pound are now trading within a cent of their year to date lows, while the Australian dollar is hovering above 90 cents."

Lien says the outlook for the US dollar remains bullish:

"With the European Central Bank and the Bank of England going out of their way to stress their dovish monetary policy bias and the Bank of Japan considering increasing the frequency of asset purchases this week, the Federal Reserve is on a solitary path to reduce stimulus.

"On this basis alone, we expect the dollar to continue to rise especially given the newfound dovish-ness from the BoE and possibly the BoJ this week."

13.00: Where is the euro heading?

Dean Popplewell, chief strategist at OANDA, noted that all the fundamentals of the Euro point to short trades in EURGBP. He said:

"Everything bar the price action suggests that the EUR should be heading south. Today’s Euro-group meeting is expected to discuss the payment and timing of the next tranche of the Greek aid package. As per usual of late, there is some market rumblings that the Troika is unsatisfied with the progress of some of the reforms, and further negotiations are expected to take place.

"This Monday morning the 17-member single currency has seen minimal market interest and volume. In the Euro session there has been whispers of some reluctant paring of short EUR positions, which has managed to push the currency to the top-end of its range as market heads across the pond for the first of this week’s sessions."

12.43: GBP Rates at mid-day

A slow day for currencies:

The pound euro exchange rate is flat on Friday night's close at 1.1603.
The pound dollar exchange rate is 0.09 pct higher at 1.4900.
The pound Australian dollar is 0.04 pct down at 1.6417.

"It's been a quiet session at the start of the week with high beta currencies firming a bit in the European session trade as equities rallied and ECB announced that Troika mission reached staff level agreement on policies needed to keep program on track in Greece," says Boris Schlossberg at BK Asset Management.

12:22: Expectations over Bank of England action to keep sterling pressured versus euro

Piet Lammens at KBC Markets says hopes of a higher GBP-EUR are unlikely at this stage, thanks largely to Carney and the Bank of England:

"There is still a lot of debate/uncertainty in the run‐up to the August meeting where the Bank will discuss the remit letter from the Chancellor to the MPC. Markets will probably continue to anticipate a more aggressive approach.

"This might keep the UK currency under pressure. The pair is still close to the 0.8637 resistance. We don’t see a trigger for a sustained break today. Even so, the pressure in this cross rate remains to the upside."

11:50: GBP/USD at 1.46?

Some fresh technical insight into the under-pressure sterling from RoboForex suggests further pressure for sterling:

"Pound continues moving inside a descending channel. We think, today the price may extend this wave towards the level of 1.4800. If the market fails to form a reversal pattern for a new correction, the pair may continue falling down towards the next target at the level of 1.4600."

11:00: Insights versus AUD, NZD and EUR

We have published a couple of insights this morning, for GBP versus EUR see here and GBP versus NZD and AUD please see here.

10:12: Euro / Pound exchange rate gains hit resistance, but upward bias favoured

So what of the pound's forecast versus the euro?

The euro has taken a massive chunk out of sterling over the past two sessions and remains in favour. However, Luc Luyet at MIG Bank says EUR/GBP may have hit resistance:

"EUR/GBP has broken the resistance at 0.8599 and is challenging the strong resistance at 0.8637 (17/04/2013 high). A short-term bullish bias is favoured as long as the hourly support at 0.8598 (intraday low) holds. Another support lies at 0.8561 (intraday low)."

10:07: GBP-USD forecasted lower in medium to short term

Luc Luyet, Senior Analyst at MIG Bank says sterling is likely to remain on the back-foot as he forecasts further losses against the US dollar:

"GBP/USD has sharply declined for the last two sessions. The support at 1.5009 has been broken. Monitor the key support at 1.4832. The short-term technical configuration remains negative as long as prices remain below then resistance at 1.5130 (03/07/2013 low). An initial resistance can be found at 1.5028 (intraday low).

"In the longer-term, the break of the horizontal range defined by the strong support at 1.5235 (13/01/2012 low) and the strong resistance at 1.6302 (30/04/2012 high) calls for a further medium-term decline."

9:55: Sterling steady on Monday morning

While steady today, when compared to a week ago the British Pound Sterling (Currency:GBP) finds itself in a poorly position:

The pound to euro exchange rate is 0.05 pct in the red at 1.1599.
The pound to US dollar exchange rate is flat at 1.4885.
The pound to Australian dollar exchange rate is flat at 1.6423.

NB: The above quotes are taken from the wholesale spot markets - your bank will affix their own discretionary spread to the above figures. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please find out more here.

9:00: Can GBP recover from last week's roasting?

Jeremy Cook at World First gives us the background to recent sterling weakness saying:

"A question I got a lot on Friday and over the weekend was, if the Bank of England are now sounding more and more like in monetary policy scenarios then why did GBP fall against EUR in the hours after the announcement? Two reasons are key here. Surprise and ease of implementation.

"It was a definite surprise that we received the Bank of England’s ‘forward guidance of further forward guidance’ alongside the chastisement they gave the market for pricing in a rate rise in 12 months’ time. Most had expected Carney to hold his tongue until the August meeting or Inflation Report. Talk about hitting the ground running.

"We forecast at the beginning of the year that the biggest risk to sterling over the course of 2013 was the appointment of Mark Carney. Osborne was keen to emphasise in this year’s Budget that help for the UK economy would not come from government but instead from ‘monetary activism’ from the Bank of England

"With this backing from the government and the likelihood that the MPC is more than happy to join Carney in his quest for lower rates for longer, the GBP was cooked on Thursday and Friday."