Worries over China as their markets reach lows not seen since 2009 could signal weakness in JPY showing buy opportunities for the pound.

17.02 The Bank of England's Sir Mervyn King signs-off in his usual style

 Sir Mervyn King appeared before the Treasury Select Committee today for the last time before he retires from the Bank of England and took the opportunity to warn people that Ben Bernanke’s comments on Wednesday may have been misinterpreted by the majority. He said:

"I think people have rather jumped the gun thinking this means an imminent return to normal levels of interest rates, it doesn't. The view that we are definitely at the beginning of the end, that we are definitely at the point where we need to raise interest rates, I think is a premature judgment about where we are, and no central bank has moved rapidly down that course.” 

"I've been very disappointed at the failure of the world to put in place the policies required to create economic conditions when it would be desirable to return to normal levels of interest rates" 

15:13 Pound drops further against the dollar following another wave of better than expected data 

The US Consumer Confidence Index hit its highest level since 2008 this month reaching 81.4, smashing analyst predictions of 75.1 and throwing more weight behind the US dollar. May’s figure stood at 75.1 and it was widely expected to be a slight improvement on that, but few expected such an increase. The present situation index rose from 64.8 to 69.2 and expectations index followed suit with an even larger gain from 80.6 to 89.5, showing that people believe things are looking up across the board. 

Lynn Franco who is the Director of Economic Indicators at The Conference Board (who compile the report) said of the positive data: “Consumer Confidence increased for the third consecutive month and is now at its highest level since January 2008 (Index 87.3). Consumers are considerably more positive about current business and labor market conditions than they were at the beginning of the year. Expectations have also improved considerably over the past several months, suggesting that the pace of growth is unlikely to slow in the short-term, and may even moderately pick up.” 

GBPUSD dropped to 1.5412 in the immediate aftermath of the release.

13.50: Pound gains against the dollar wiped out by better than expected durable goods orders data

The USD pushed upwards and extended its recent bullish run following positive data that show an unanticipated increase in the number of durable goods orders in the United States. Beating predictions by most economists the release showed an increase of 3.6% on the previous month.

The dollar strengthened across the board including against the pound, wiping out the previous morning gains by the pound that saw it break above the 1.5475 mark briefly in the lead up to the data releases.

GBPUSD is now only 0.02% above yesterdays close.

13.29: Highlights of President of the ECB Mario Draghi's Speech

At 13.15 today Mario Draghi the ECB President spoke at the Wirtschaftstag in Berlin, he made no statements that would shock the markets or plunge them into a period of volatility but below are a few key comments made by him: 

"In terms of monetary policy, price stability is assured, and the overall economic outlook still warrants an accommodative stance. We see some signs of stabilisation in sentiment, even though uncertainties remain. And we expect that monetary stimulus and improvements in financial markets will support a recovery later in the year.

The situation has improved; fragmentation has receded; and tentative signs of stabilisation have occurred. 

But monetary policy is only a small part of the overall policy agenda for overcoming the crisis and laying the foundations for sustainable growth and renewed employment creation. Governments, social partners and other important economic decision-makers have to live up to their responsibilities, too."

Draghi then went on to say:

"One key issue is structural reform to make euro area economies more business friendly and more competitive in the global economy.

Many European countries have structural problems: it takes longer to get licenses, permits and other administrative authorisations than in other countries; the judicial system is slower; and regulation is more complex. Structural reforms may hurt a few vested interests, but they would clearly strengthen the effectiveness, competitiveness and, yes, also the fairness of our economies. 

Another key issue is growth-friendly fiscal consolidation. We have to be mindful that debt-based fiscal spending is no way to growth. Euro area government debt has risen by almost 20 percentage points of GDP in the last 15 years and by over 50 percentage points in the last 30 years. At the same time, growth has fallen, from 3.8% on average in the 1970s to 2.1% in the 1990s and roughly zero now. Debt spending has not avoided the stagnation of economic growth. 

But fiscal consolidation can be made much more growth-friendly by cutting unproductive expenditures, by establishing credible and detailed medium-term fiscal plans and by lowering the tax burden where it is harming economic activity and job creation in particular. 

The third key issue is ensuring a sound financial system. This is where current efforts to establish a European banking union are crucial. The aim of the banking union is to establish transparency, stability and incentive-compatibility in the euro area financial market." 

13.13 GBP/USD strengthens in the lead up to data releases and AUD/NZD fight back..for now.

The pound has strengthened against the dollar in the run up to the release of data from the states including the durable goods order and the consumer confidence. This is off the back of positive news this morning as the BBA announced mortgage approvals higher than expected. The pound is currently up by 0.22% (0.0034) on yesterdays close and is currently at 1.5468.

Meanwhile the Australian and New Zealand dollars are both looking stronger against the pound sterling despite a generally negative outlook on both, not helped by the weighing concerns over China’s economy. Both will be increasingly volatile in the next few days and the US data releases could also have an impact on the pairs.

The AUD deprecation has not been helped by the Australian Prime Minister who hailed it as a good thing, saying in a speech yesterday “A sustained depreciation of the Australian dollar in those circumstances would be a very good thing, to stimulate further growth in the non-mining sector”. 

11.22 GBP/USD Long Term Technicals

Looking the at pound sterling against the greenback from a technical point of view, 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. The weakness from the top at 1.5752, coupled with short-term overbought conditions, call for a new phase of weakness. A test of the support at 1.5009 (29/05/2013 low) is expected at the very least in the medium-term.

GBPUSD is currently up 0.08% on yesterdays close at 1.5446.

09.55 BBA Mortgage Approvals (UK) Better Than Expected

The British Bankers Associations data for the May 2013 mortgage approvals came out much better than expected this morning. With the previous of 32.2k the general expectation was a slightly improved 33.1k, but the actual data was 36.1k. GBPUSD had tested 1.450/60 in the build-up but is currently flirting with yesterdays close.

09.15 Todays Event Calendar for Sterling

 There are several key events that are worth noting in todays trading, listed below are the ones mostly likely to have a significant impact on the markets.

All times GMT+1

09.30 (UK) British Bankers Association release their data on mortgage approvals from May. Previous months was 32,000 and the general expectation is a slight increase to around 33,100.

13.15 (Euro) President of the ECB Mario Draghi is making a speech which is likely to be the biggest effect on the markets, with short term Euro trading often impacted by his comments.

13.30 (US) The US Census Bureau releases its data on durable goods (i.e. goods expected to last for three or more years) orders. The previous release was up 3.5% and further increase is expected but approximately 3% so anything over this will likely encourage bullish trading for the USD.

15.00 (US) The Consumer Confidence data for June is released which is a good indicator of the confidence individuals have in the economy and it’s activity.

15.00 (US) New Home Sales data for May is also released by the US Census Bureau which is a good indication of the housing market. The previous months was 0.454m and this is expected to increase slightly to 0.462m.

22.00 (US) The final notable event is a speech by the US Secretary of the Treasury Jacob Lew which, depending on the content of his speech, could well effect the USD and related pairs.

09.06: Spot Rates  

 The GBP-USD is the only one of the following three pound pairs that is showing a gain on yesterday’s prices, and it is a very minimal one.

GBP-AUD is 0.25 pct lower on yesterdays close at 1.6447

GBP-USD is up 0.07 pct at 1.5445.

GBP-JPY is 0.23 pct lower at 150.4920.

NB: The above are wholesale market quotes; your bank will affix its own discretionary spread when passing on your retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please find out more here.

07.45: China fears effect GBPJPY

 China’s stock market fell below the 1900 mark for the first time since January 2009 yesterday as it entered a bear market over concerns for the governments credit-tightening policies. Regional markets are understandably cautious as the situation developments and this may effect GBP pairs featuring Asian currencies, most notably the JPY.

Recent session highs may represent resistance for the pound against the Japanese Yen at 151.08. If GBPJPY can rally break through this level then further resistance may lie at this week’s high of 151.76 followed by the highs of late last week at 151.93. Key support levels start at 150.53 followed by last Fridays low of 149.73.

The Danske Bank research team has identified a buy opportunity in the GBP-JPY at 151.10 targetting 154.20.

GBP/USD rose to 1.5434 yesterday. The pair may well trade within a range between 1.5200-1.5752, its support and resistance levels.

Having moved upwards through yesterday’s trading the GBPEUR is being sold in early morning trading in the build-up to the opening of the UK markets. Dropping to lows not seen since it’s rally as the US markets opened yesterday.