British Pound on Wednesday the 10th: All eyes now un FOMC + IMF raises UK GDP growth forecast
The big event of the day comes in the form of the US FOMC and Ben Bernanke. All the coverage of how sterling navigates its way through the day is right here!
17:32: Sterling in strong gains versus the commodity currencies
So where is GBP in late afternoon in London? We note strong gains versus commodity currencies such as AUD, CAD and ZAR. Poor Chinese data released this morning has really hit the commodity currencies. However, all is calm versus the majors ahead of the US FOMC event.
- The pound euro exchange rate finds itself absolutely flat on yesterday's close; GBP-EUR is at 1.1633.
- The pound US dollar exchange rate is 0.48 pct higher at 1.4939.
- The pound to Australian dollar is a hefty 0.95 pct up at 1.6359. (A strong recovery here).
- The pound to Canadian dollar is 0.36 pct higher at 1.5709.
- The pound to South African Rand is 0.64 pct higher at 15.000.
Please note: The above quotes are taken from the spot markets, your bank will affix their own spread to the figures. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please find out more here.
16:50: Has the US dollar over-extended itself?
This site may be called the Pound Sterling Live - but today the focus is squarely on the US dollar.
Ahead of the US FOMC event it is worth noting that the recent dollar rally could be nearing exhaustion levels. So while analysts consider the impact of potential FOMC moves the technical indicators could actually be where the real story is.
We hear from Ilya Spivak at FXCM:
"US Dollar Technical Analysis– Prices broke above resistance at 10946, the 100% Fibonacci expansion, opening the door for a move higher to challenge the 123.6% level at 11016. Early signs of negative RSI divergence warn of ebbing bullish momentum however and hint a turn lower may be ahead.
"The 10946 mark has been recast as near-term support, with a move back beneath that aiming for the 10848-77 area (marked by the late-May top)."
(Click to enlarge).
15:30: What the US dollar will need from the FOMC to be bid higher
Kathy Lien at KB Asset Management weighs in ahead of today's key event (more views seen below):
"Bernanke could still spend time stressing the difference between tapering and rate hikes.
"The exit is clearly marked so even if the FOMC minutes reveal nothing new, the divergence in global monetary policies should keep the dollar bid. For the minutes to be overwhelmingly dollar positive, we need significant support for tapering in September."
13:43: Beware fresh declines in GBP-USD
Are we about to see the pound head yet lower versus the US dollar?
Matthew Weller at GFT says this could indeed happen:
"The GBP/USD dipped during yesterday’s North American trade, briefly ticking to a new 3-year low below 1.4830 before recovering back toward 1.4900 overnight. At this point, the pair looks likely to consolidate between 1.4830 and 1.4900 until some of this afternoon’s event risks.
"If the Fed minutes and Bernanke remain optimistic about tapering in the near future, the GBP/USD could well break below 1.4830 and see further weakness as the week progresses."
13:30: Good news from the IMF
Some support for sterling as the International Monetary Fund raises its forecast for UK growth this year in the face of sharp cuts to world, US, eurozone and emerging market predictions.
The UK's forecast for GDP growth this year is raised from 0.7 pct to 0.9 pct.
Its outlook for 2014 was held at 1.5 pct.
The forecasts for Britain now stand head and shoulders above its major European peers, with Germany the closest at 0.3pc growth this year and 1.3pc next.
Good news for GBP-EUR? Not yet it seems!
13:22: US dollar a sell ahead of US FOMC
More ahead of today's important FOMC decision and Bernanke speech. Stephen Gallo at BMO Capital Markets says:
"We think clues suggesting that the Fed remain concerned about market volatility or that tapering will start later than September will force expectations for the first Fed rate hike to be pushed back, making the USD a “sell”, however we expect such weakness to be rather limited."
13:03: Market expectations ahead of the US FOMC
Osborne tells us the likely effect on FX of the FOMC outcome:
"The market expectation is currently for tapering in September, so any signals otherwise should see a decent USD reaction (higher if tapering sooner, lower if later)."
More views to follow.
12:55: The FOMC is the big event for currency markets now
For currency markets there is only one thing to watch out for from now says Shaun Osborne at TD Securities:
"For FX at least, the impact of the risk-negative events of the past 24 hours has worn off fairly quickly and the focus has shifted to the Fed. The FOMC minutes at 2:00PM ET and Bernanke’s speech at the end of the day 4:10PM ET are the main events of the week where the market will be searching for any more clues on their thinking about QE tapering."
Note - if you are in the UK FOMC Minutes are at 19:00, and the Bernanke speech is at 21:10.
For sterling the impact of the FOMC event will be felt via the US dollar.
10:30: Latest spot rates
The British pound sterling (Currency:GBP) remains under pressure:
The pound to euro exchange rate is 0.1 pct in the red at 1.1621.
The pound to US dollar exchange rate is 0.17 pct higher at 1.4892.
The pound to Australian dollar rate is 0.17 pct in the red at 1.6178.
09.10 - EUR-GBP Falls in Asian Session
The EURGBP begun to give away some of the gains it made in yesterday's trading through the Asia session this morning. It had hit the 0.8671 level before falling back following the end of the US session
The pair continues to hold over the 55 day ma at 0.8510 and the range lows at .8570, Karen Jones, chief analyst at Commerzbank said that, “initial support is the top of the previous range at 0.8597. A close above the 0.8636 April high should act as a break point to the 0.8793/0.8814 highs seen earlier in the year.”
07.40 - Today's events
09.00 (Italy) Industrial output data
10.00 (Greece) Industrial Production data
11.00 (Portugal) Consumer Price Index and Global Trade Balance both released.
12.00 (US) MBA Mortgage Applications figured released by the US.
21.10 (US) Ben Bernanke, head of the federal reserve, gives a speech as the markets look for further indications of short term monetary policy changes.