The British Pound is losing ground versus the Euro and US dollar once more, this as GfK reports that the UK consumer is undoubtedly gaining in confidence which we see as a long term pro for the UK currency. The outlook for GBP is dominated by tomorrow's PMI data and Bank of England decision.  

Highights:
@ 00:05: GfK reports a sharp increase in UK consumer confidence.
@ 09:23: The reason why sterling is in the dog box.
@ 10:13: Month-end and sovereign buying sends GBP/EUR yet lower
@ 13:31: US Dollar surges against British Pound
@ 16:30: The magic number from Manufacturing PMI to look out for tomorrow

16:45: GBP deep in the red (except against the Aussie!) after the London close

The Pound Euro exchange rate is 0.42 pct in the red at 1.1441.
The Pound US dollar exchange rate is 0.34 pct lower at 1.5186.
The Pound Australian dollar exchange rate is 0.84 pct higher at 1.6956.
The Pound New Zealand dollar exchange rate is 0.08 pct higher at 1.9100.
The Pound Canadian dollar is 0.46 pct lower at 1.5635.
Please keep in mind that the above quotes are representative of the wholesale markets - your bank will charge a discretionary spread to the figures when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency of up to 5%. Please read more.

16:30: Manufacturing PMI, Bank of England rate decision tomorrow

Finally, we get some real GBP-moving news to look forward to.

Thursday's first big event is the release of Markit Manufacturing PMI (Jul) at 9:30. Look out for a release either side of consensus forecasts of 52.8. A positive beat should boost sterling.

At 12:00 we get the Bank of England MPC interest rate decision. To be honest we are not expecting much here, the 7th of August will be the important Bank of England event with the inflation report being dealt with.

Nevertheless, any surprises at 12:00 tomorrow will send GBP on a tangent.

15:50: GBP in danger of further declines against Canadian dollar

Greg Moore on the possibility of further decline against the Canadian dollar:

"GBP/CAD weakness below the 200-day MA and trend (H&S neckline) support at 1.5678 implies growing downside risks for the GBP form here. Short-term trend momentum signals are bearish but these oscillators are yet to show a broader alignment across medium-term signals.

"Still, short-term risks at least point lower and, if the H&S signal gets any sort of traction, the GBP might be on course for a drop to 1.50. We had thought that the medium-term balance of risks favoured a retest of 1.52/1.53 after the recent rejection of the 1.62/1.63 area."

14:04: Deutsche Bank bullish on USD in the second half 2013

A timely note from Deutsche Bank analyst George Saravelos who says we are nearing the time to rebuild US dollar longs:

"Ultimately, and given Fed re-pricing so far, our positive USD outlook into H2 rests on improving US growth while other central banks stay very dovish. On that front, we think the BoE could deliver on guidance in next week’s inflation report, which keeps us comfortably bearish GBP.

"Despite the summer pause, we still like owning dollars with a mix of G10 (JPY, GBP, AUD) and EM (TRY, MYR, BRL) shorts being our favorites. Growth surprises, rather than taper timing is the dominant variable, and as such we see Friday’s payrolls, rather than tonight’s FOMC as a bigger market event. With seasonality turning particularly positive in coming weeks, investors should think hard before leaving for the summer holidays with flat dollar risk."

13:31: GBP sees massive losses against the US dollar

The British pound / US dollar exchange rate is now 0.62 pct in the red at 1.5130. US dollar gains are widespread with EUR/USD 0.33 pct lower.

ADP and GDP data releases are behind the gains for USD. As we warned earlier the likelihood of these moves was indeed possible.

US Q2 annualised GDP is much stronger at 1.7% vs  1% expected

U.S. ECONOMY GREW 2.8% IN 2012, REVISED UP FROM 2.2% ESTIMATE

U.S. ADP non-farm payrolls rise 200,000 in July - the reading that we warned would trigger USD gains.

12:27: Relief rally for GBP versus EUR ahead?

Forex.com say EUR/GBP looks overbought at current levels:

"This cross surged above 0.8720 earlier, double top resistance from 17th July. However, it is hitting resistance at 0.8740, ST support lies at 0.8720 then 9.8705. Looking overbought in the ST."

A relief rally for sterling ahead perhaps?

11:40: Beware of GBP/USD volatility ahead

Those keeping an eye on the GBP/USD rate should be aware that today offers some volatility:

Boris Schlossberg at BK Asset Management:

"Before the FOMC statement at 18:00 GMT, the currency market will get a glimpse of the ADP data and the US Q2 GDP results. The market essentially expects to see the same readings from the ADP as the month prior, but if there is significant deviation either way the greenback could react violently.

"An ADP print of 125K or less would likely cause a further selloff in USD/JPY with the pair possibly testing support at 97.00 as hopes of tapering will fade fast."

10:13: Month end flows and sovereign buying sends GBP/EUR lower

The GBP/EUR exchange rate is 0.3 pct in the red at 1.1458.

Richard Driver at Caxton FX believe he knows why:

"The pound is being sold against the euro thanks to sovereign euro buyers in month-end trading – a feature we have become used to. Many traders clearly have their sights set on lower targets for this pair, particularly amid Carney’s dovish shake-up of Bank of England monetary policy. At the moment GBP declines are proving easy pickings."

9:23: Why is Sterling being sold?

Jeremy Cook at WorldFirst tells us why the British Pound remains in the dog box:

"Sterling came in for a bit of a beating yesterday and apart from AUD and SEK, which fell on dovish central bank comments and a miss on GDP respectively, GBP was the worst G10 performer.

"We estimate that this as a result of increased fears that the MPC and Mark Carney are going to cap rates in the UK at 0.5% for as long as 3 years as part of the Bank’s forward guidance plan. Combined with their inability to rule out the use of further QE, it’s not hard to see why sterling was sold heavily."

8:25: Mixed exchange rates

The British pound sterling (Currency:GBP) is witnessing similar patterns to those seen yesterday - losses against the USD and EUR, but gains against the commodity currencies (AUD, ZAR, NZD etc):

• The Pound to Euro exchange rate is 0.2 pct down on a daily basis at 1.1467.
• The Pound to US dollar exchange rate is 0.18 pct lower at 1.5209.
• The Pound to Australian dollar exchange rate is 0.3 pct higher at 1.6887.
• The Pound to New Zealand dollar exchange rate is flat at 1.9066.

Please keep in mind that these quotes are representative of the wholesale markets - your bank will charge a discretionary spread to the figures when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency of up to 5%. Please read more.

8:15: "No doubt that consumer confidence has recovered strongly"

Nick Moon, Managing Director of Social Research at GfK, comments:

“There is now no doubt that consumer confidence has recovered strongly from the unparalleled trough of the last five years. At -16, the overall Index is now at its highest point since April 2010. In the last three months the Index has risen by 11 points, one of the best single quarter improvements since the Index started climbing up from its all-time low of -39 in July 2008 after the credit crunch."

00:05: The all-important UK consumer is gaining in confidence

More confirmation that the UK economy is on the mend. At midnight GfK reports UK Consumer Confidence Index has increased by five points this month to -16. See Below:

This is the best outcome since April 2010.

We see this as a significant reading for long-term British pound valuation as the UK consumer is a key engine of the UK economy.