The British pound looks FinMin Summit for direction on FOMC minutes EU

7th July 2012 07:10 GMT fundamental outlook for British Pound: Neutral The British pound remains vulnerable to risk sentiment trends, GBPUSD show a firm correlation with the MSCI World Stock Index. In the aftermath of last week's disappointing U.S. jobs report and underwhelming stimulus efforts by the ECB and the BOE is hoping to make this the FOMC minutes from June's outing amidst that the Fed bring relief. Although Ben Bernanke and company decided to introduce no QE3 last month, dealers are keen to assess the extent to which such an option entered into conversation, expectations for a possible expansion of the balance sheet, revealed in the coming months will lead to. All in all, the utility seems to be of another QE program highly suspect. In fact, with U.S. Treasury yields already so low that after adjusting for inflation, real interest rates are negative, the 10-year maturity, it seems unlikely that a further push much lower borrowing not to stimulate. The Fed is certainly not blind to the limits of further QE, but it is equally sensitive to the fact that trigger a strong signal to financial markets may appeal to pandemonium. This means that the door open for further easing is likely to be retained, at least rhetorically. In this sense, language increases the likelihood that additional accommodation is expected to increase the perceived risk, and with him the pound. Needless to say, the reverse scenario is also the case. In addition to investors yearning for looser monetary conditions, the debt crisis is set to the euro zone to return to the top, as the currency of Finance issued for a meeting convened on Monday. The sit-down is expected that civil servants, the implementation of June to begin to see the EU summit. Although little longer-term issues such as joint bank governance and expanding the EFSF / ESM bailout funds forces should be reached, the Spanish bank bail out prominently in the proceedings. Information about the efforts are likely to be ratified at the seat. The British pound continues to be a beneficiary of the regional port flows in times of growing concern over the euro zone, which means that as a result of disappointing investors, the UK currency may increase. DailyFX provides forex news and technical analysis on trends affecting the global currency markets.

The British Pound Outlook depends on the BoE in Paris for more relaxing

30 June 2012 analyst 02: 49 GMT
fundamental forecasts for the pound sterling: Rally
The pound sterling has reduced the decline of this month that the EU Summit survived the reactions of the market, but the sterling may struggle to hold his ground next week as the market players see the Bank of England is taking additional steps to protect the UK economy. While the BoE is widely expected to maintain the reference to 0.50% interest rate, there is growing speculation that the Central Bank embark in more quantitative expansion as the sovereign debt crisis continues to hinder the fundamental Outlook for the region.
A Bloomberg News poll shows 39 of 41 surveyed economists see the monetary policy Committee increase the ease of purchase far beyond the target of 325 GBP, and the Central Bank can continue to do its cycle of relaxation in the second half of the year Governor Mervyn King is cautious over more to the region. Indeed, Mr King sounded pessimistic on the economy of his testimony before the Council of the Treasury Committee, earlier this week, and it seems that the head of the Central Bank attempts to of swaying the MPC to expand the balance sheet more far to combat the risk of loss to the U.K. economy. The United Kingdom is in a technical recession, fears of a prolonged economic slowdown may push additional votes for ease, but we see an another 5-4 split in July as the underlying growth of price stickiness raises the threat of inflation. Although the BoE curbed its forecasts for growth and inflation, we have seen the superior price containing consumer heart tick in may, with annualized sales growth of 2.2%, and the majority can continue to approve an approach to wait and see the fundamental Outlook for Britain remain confused with great uncertainty.
Although the GBPUSD had an impressive rally in July, the couple seems to have carved a high low in June, and the lack of dynamism of stand on the tracing of Fibonacci 61.8% of 2009 low to high around 1.5690 - 1.5700 can produce a correction in the short term before the decision of BoE rate as market participants weigh prospects for monetary policy. However, a program for the purchase of the assets of the BoE increase could force a sharp decline in the exchange rate, and we see the GBPUSD allow execution of the other 50.0% Fib (1.5270) should the Central Bank strike a tone very moderate for the area. -DS
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30 June 2012 02: 49 GMT

Pound expected Greek after election for the Direction signals

Fundamental forecasts for the pound sterling: neutral

Financial markets have turned their attention to the outcome of the Greek elections of the weekend, and the pound sterling is no exception. A swelling of the correlation between GBPUSD and the MSCI World Stock Index--a proxy for trends in sense of risk of the whole of the market - is the UK currency squarely at the heart of the volatility as Greek voters to choose between a Government which would respect the commitments of Athens, according to the terms of bailout of the EU and the IMF and the other who abandon them. The last course of action would likely pave the way for the Greece to get out of the euro zone.

Opinion polls place the pro-bailout of the new democracy (ND) party and its main antagonist Syriza in dead heat before the election, suggesting that he is unlikely to win a majority of Director of each side. This means that the most likely result is the emergence of a kind of coalition. In this spirit, a positive feeling and thus GBP-support result would see ND and the public left Pasok party enough votes to form a United front of pro-bailout, fears of a Greek departure of the currency bloc disorder. Any post-election result that fails on this front rises to both Sterling and risk appetite.

While the result of the election of Greek will set the tone for the coming week, it is unlikely to establish a firm trend as such. Finance Ministers of the euro area are rumoured plans a teleconference immediately following the result of the election to suppress any major upheaval in the financial markets, if a jurisdiction. A more formal meeting of the Eurogroup is scheduled for the end of the week in the Luxembourg. Separately, the leaders of the g-20 are due to a peak of two days just after the results of the vote, with the debt crisis the euro almost certainly high on the agenda. All this activity makes the overwhelming probability of high volatility of sentiment trends and Sterling by extension, with a directional bias should emerge that after all the dust firmly falls concrete.

The economic calendar is apparently packaged with the title of press. Minutes of the meeting of the Bank of England from June political developing that may s ICC, of employment and retail sales reports are all due to crossing of the son. Implications for the action of the prices seem a little limited, however given their limited monetary policy after impact than the Central Bank Governor Mervyn King them preempted by the announcement of a new credit-loan program intended to ready UK last weekend. The said extent guaranteed term Repo (ECTR) will provide banks at least 5 billion pounds sterling per month for a period of at least six months and spread a minimum of 25 bps. Although fully operational details are a little murky, Setup is likely to prove GBP-negative over time, if it is acquired with the new creation of liquidity similar to the trigger.

-EAST

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$ /¥ Dollar and Yen at risk such as feeling Steadies, Pound may rise on intellectual property data

12 June 2012 strategist 05: 13 GMT
US dollar, Japanese Yen correct low markets Digest the day previous volatility British Pound may find support as UK Industrial Production trend improves in April reviewed ECB of financial stability can supply fears Greek debt crisis election looms the US dollar and the Japanese Yen declined against their high counterparts in trade a night in what appeared to be a correction after the saw of long price action during the 24 hours preceding. Indeed, the withdrawal in the two go - to currencies refuge without catalyst Asia performance stock, where the shares followed Wall Street lower. Sentiment was initially supported by the news of bailout of the banking sector the Spain yesterday only to reverse noon course and the strength of the assets risky in negative territory. & S P 500 stock index now generously greater point of refuge currency index futures are likely to remain under pressure, but is betting on support seems clearly dangerous in the current environment.
Figures for Industrial Production in the United Kingdom in starring calendar data, with expectations to a narrow monthly increase of 0.1% in April. Search past months of volatility, the annual reading should see the output of the contract to 1% from April 2011, marking the negative footprint more small in nine months. The result can downgrade other stimulus expectations Bank of England and to increase front-end yields, provide support to the pound sterling. Indeed, the correlation between GBPUSD and binding UK 5 years are now stands at the top of seven months (0.69 on studies of variation in percentage of 20 days). The bi-annual report of the ECB financial stability review is also due to cross the wires. While merchants are unlikely to be particularly surprised by the risk that the Central Bank will likely be identify, the possibility of a strong reaction appears important in view of the proximity of the Greek dreaded elections on 17 June.
Asia session: What happened
Investigation of Manpower New Zealand (3)
REINZ housing price index (may)
REINZ (MoM) housing price index (may)
Investigation on labour Australia (3)
Spending by map NZ - retail (MoM) (may)
RICS house price balance (may)
Loans & discounts Corp (YoY) (APR)
Tertiary industry index (MoM) (APR)
Session of the euro: what to expect
French non-farm payroll (QoQ) (1 q F)
June 2012 SECO economic forecasts
Industrial production (MoM) (APR)
Industrial production (YoY) (APR)
Manufacturing Production (MoM) (APR)
Manufacturing Production (YoY) (APR)
ECB publishes the journal of financial stability (JUN)
Critical levels

$Pound Outperforms as BoE Holds Interest Rate, Easing Unchanged

 THE TAKEAWAY: Bank of England says interest rates, quantitative easing unchanged -> China cuts interest rates for the first time since 2008 -> UK Pound climbs against US Dollar
The Bank England decided today to keep its monetary policy steady at the end of its 2 day deliberation process, sparking a wave of outperformance in Sterling and invalidating speculation that the central bank would take a more dovish stance.
The June benchmark interest rate will remain unchanged at 0.50%, and the BoE’s quantitative easing target will stay at 325 billion pounds. Although economists did not expect a change today, speculation that the central bank would adopt further accommodative measures had grown recently on news of the worsening political crisis in Europe.
Even so, further easing in the months to come cannot be ruled out. The Bank of England’s most recent monthly inflation report said “the possibility that the substantial challenges within the Euro area will lead to significant economic and financial disruption continues to pose the greatest threat to the UK recovery.”


The British pound spiked on the news that further easing will be delayed for at least a month. The Pound was strong against the Euro and US Dollar directly after the report.

$Australian dollar and the pound sterling outperform the PBoC, BoE

Fundamental headlines
-Finnish leader said we concerned European banks - Bloomberg
-Map of Obama re-election shaken after the victory of the Walker Wisconsin - Bloomberg
-Spain passes a Test market, Merkel plonge Summit hopes - Reuters
-China cut its interest rates - WSJ
-Officials say Fed may need to act - WSJ
Summary of Asian and European Session
After the massive rally of yesterday - in fact the largest gathering since December by the Australian Dollar and the Dow Jones Industrial Average since December 20, 2011 - it would seem that all the world's problems have been resolved. The Australian economy, for example, has completed the "Triple Crown" for his important releases this week: a dove under Reserve Bank of Australia than expected, which helps maintain yields high; a blowout first quarter, the growth of reading, which means may be exaggerated fears of Asian growth. and market the work of reading for may burst, and while he showed that the rate of unemployment to check higher (from 5.1% to 5.0%), which is a further symptom of workers entering the labour market.
Flash forward in the European and senior session giving currencies and correlated with the risk assets started out. The flight safety was purely temporary - as central banks were active in the market. In considering the economic role, action price near the beginning of the European session would lead one to believe that the Bank of England had crossed and eased its monetary policy. Instead, it is the people's Bank of China which was active in the market, and, in a surprise gesture, the Central Bank announced that its one year loan and deposit rates would increase by 25-basis points, effect of Friday. Thus, even if the market participants have been largely disappointed by the inaction of the Bank of England, they received stimulus package that they have been nostalgia, comes from a different source.
A large part of the event was based on the hope that the central banks around the world will be facilitated. Frankly, it is difficult to think of a legitimate reason how the testimony of today by the President of the Federal Reserve Ben Bernanke will respect the hype surrounding it since lamentable payrolls report non-farm Friday. The Fed has made clear that it is taking transparency and credibility seriously now, and a few months of employment after employment growth exceptionally strong growth is not to change monetary policy - yet. In addition, in the light of what is in course with the weakening of Asian and European growth prospects, the US economy has been perform relatively better. Also, for the form: when was the last time that a President of the Fed announced plans for a major boost in testimony to Congress?
Take a look at credit, the debt of the European periphery continues to show signs of improvement, led by none other than the notes of Italian and Spanish on the shorter end of the yield curve. The Italian 2-year note yield fell to 3.569% while the performance in Spanish note 2 years fell to 4.122%; These two are seated at their low weekly in terms of performance (or highs in price).
AUDUSD 5 graphic min: 7 June 2012

Graphing with Marketscope - prepared by Christopher Vecchio
The Australian Dollar was subsequently today top interpreter reading blowout labour market and the rate of the PBoC cut, wins an another 0.65% against the U.S. Dollar (and now is 3.02% since Friday). The pound sterling also exploded more after the BoE chose not to change monetary policy, including the GBPUSD of 0.54% appreciation. The Japanese Yen continues to weaken, excretion of 0.63%.
24-Hour price Action

Main levels: 14: 50 GMT
So far, on Thursday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is low, trade 10152.96 at the time when this report was written, after opening at 10171.71. The index traded mostly lower, with the high in the 10190.54 and the 10144.37 low.

£ British Pound Outlook Calls for Mixed Performance vs. Top Currencies

26 May 2012 04:12 GMT

Fundamental Forecast for British Pound: Neutral
Sizing up risk appetite trends, the British Pound appears likely to yield a mixed performance in the week ahead, with gains likely against the safe-haven set of currencies while losses are sustained against the Euro and the overtly sentiment-linked commodity dollars (particularly the Aussie and the Kiwi). Rapidly eroding Bank of England policy expectations may undermine the select pockets of Sterling strength however.
The EU leaders’ summit ended with policymakers putting the fate of Greece firmly in the country’s own hands, meaning little is likely to change on this front until repeat elections are held in mid-June. Meanwhile, the latest batch of dismal PMI readings from China and the Eurozone reinforced the threat that both economies post to global growth but offered nothing that was thematically unfamiliar for investors. This hints that the supply of near-term negativity that can conceivably unhinge markets is running dry, opening the door for profit-taking to spark a correction in recent trends.
For the British Pound, this amounts to a rebound against established safe havens like the US Dollar and Japanese Yen and pullback against the Euro where the UK unit served as a regional refuge to capital feeing the uncertainty tainting the single currency. Losses also appear likely against high-yielders like the Australian and New Zealand Dollars, where the Pound is the lesser “risky” currency and so finds itself at a disadvantage amid a broad-based recovery in sentiment.
On the domestic front, the focus is on Friday’s Manufacturing PMI print. Expectations call for the factory sector to shrink in May, marking the first contraction in five months. The result threatens to reinforce negative cues from April’s soft inflation reading as well as the downward revision of first-quarter GDP results and may put downward pressure on front-end yields along with Sterling as BOE rate expectations sink. Indeed, a Credit Suisse gauge of priced-in policy expectations for the coming year has dropped precipitously and now stands at the lowest in four months.
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26 May 2012 04:12 GMT

£ British Pound: BOE Inflation Report, Euro Zone Debt Crisis in Focus

12 May 2012 01: 14 GMT  Fundamental Forecast for British Pound: Bullish
Familiar themes persist for the British Pound in the week ahead, with prices relying on a precarious balance between the impact of Eurozone crisis fears and an outlook for Bank of England monetary policy that appears to be turning relatively hawkish. In the week ahead, both drivers will find ample triggers for volatility, but the path of least resistance appears to point toward a broadly supportive environment for the UK currency against most of its top counterparts.
On the monetary policy front, the focus will be on the updated BOE quarterly Inflation Report. The document served as the basis for last week's MPC decision to leave benchmark interest rates on hold as well as opt not to expand the score of the quantitative easing program. Since the BOE typically doesn't release a statement when no. changes to policy are made, the report will serve as the markets' leading guide on the central bank's thinking for the coming three months, and thereby carries heavy implications for the Pound.
Minutes from April's sit-down of the rate-setting committee showed it's theretofore most dovish voice - Adam Posen - withdrew his long-standing call for additional EQ amid concerns about sticky core inflation. If Mr. Posen believes that price growth concerns overshadow the UK economy's descent into a technical recession as the chief concern of policy, there is a good chance that other less-dovish members of the committee are likewise if not more perturbed. Confirmation of such a shift in tone is likely to prove supportive for Sterling, boosting front end yields and scattering dilution fears.
In the Eurozone, uncertainty persists over the political landscape in Greece as the Pasok party attempts to cobble together a ruling coalition able to meet the country's commitments under the EU/IMF bailout program. Failure to do so would reinforce increasingly credible fears that Greece may be forced to leave the Eurozone and possibly the EU altogether, an unprecedented outcome with no forecast-able benchmark in terms of its practical implications for financial markets. With that in mind, continued uncertainty is likely to perpetuate capital flight out of Euro-denominated assets. Given the floor imposed on the Swiss Franc via SNB intervention, the next logical regional haven has become the Pound. -IS
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12 May 2012 01: 14 GMT

€€€ Euro to Look Past German Jobs Data to PMI Revisions, Pound at Risk

Euro Likely to Look Past German Unemployment Data, Focus on PMI Revisions British Pound Selling May Continue on Construction PMI, Mortgage Approvals US Dollar, Risk Appetite Outlook Hinges on ADP Report with QE3 Bets in stream Japanese Yen Sold as Asian Stocks Rise Following Surprisingly Strong US ISM German Unemployment figures headline the calendar in European hours, with expectations calling for the economy to add 10,000 jobs in April. The unemployment rate is expected to hold at 6.7 percent, a record low. On balance, the resilience of the German labor market is nothing new and ought not to prove particularly market-moving for the Euro, with traders paying closer attention to final revisions of April's Eurozone Manufacturing PMI numbers.
Early estimates showed the factory sector shrank at the fastest pace since June 2009, pointing to deepening recession. This may prove to weigh on the single currency through building ECB rate cut expectations ahead of this week's policy meeting. Although no. change in benchmark lending rates or the announcement of new LTRO efforts are expected this time around, signs of an increasingly aggressive slowdown will pay investors for dovish rhetoric from ECB President Mario Draghi.
Elsewhere on the docket, UK Construction PMI is expected to show the home-building industry grew at the weakest rate in three months while Mortgage Approvals hit the lowest since March 2011. With monetary policy expectations in focus, these outcomes may reinforce downward pressure on the British Pound following yesterday's dismal manufacturing PMI result.
Later in the session, the U.S. ADP Employment report will enter the spotlight. The likelihood of a Fed QE3 program remains a driving theme for the US Dollar and risk appetite at-large, meaning a soft outcome is likely to be taken as fodder for stimulus hopes and weigh on the greenback. Alternatively, an upside surprise will probably produce the opposite result.
The Japanese Yen underperformed in overnight trade, sliding as much as 0.4 percent, as Asian stocks advanced and sapped demand for the safe-haven currency. The MSCI Asia Pacific regional benchmark equity index added 0.7 percent after a stronger-than-expected ISM Manufacturing print from the US improved the outlook for regional exporters.
Asia Session: What Happened
Labor Cash Earnings (YoY) (MAR)
Euro Session: What to Expect
Retail Sales (Real) (YoY) (MAR)
Italian PMI Manufacturing (SAM)
French PMI Manufacturing (APR F)
German Unemployment Change (APR)
German Unemployment Rate s.a. (APR)
German PMI Manufacturing (APR F)
Italian Unemployment Rate s.a. (MAR P)
Euro-Zone PMI Manufacturing (APR F)
NET Lending dry. on Dwellings (MAR)
M4 Ex IOFCs 3 m Annualised (MAR)
Euro-Zone Unemployment Rate (MAR)
Critical Levels

[[ British Pound Looks to Q1 GDP Report to Support Continued Gains ]]

Fundamental Forecast for British Pound: Bullish

• Sterling Gains as CPI Posts First Gain in Six Months
• UK Unemployment Rate Unexpectedly Fell in March
• BOE Minutes Reveal Posen Abandoned Call for QE
• British Pound Surges on Strong Retail Sales Report

The British Pound stands apart from most of its major counterparts, with prices primarily responsive to domestic monetary policy expectations rather than the broad-based sense trends that dominate much of the FX space. Indeed, GBPUSD now shows a tremendous correlation with 2-year UK bond yields, which implicitly reflect traders' outlook for the near-to medium-term path of borrowing costs.

In the week ahead, this puts the focus on the first - quarter set of GDP figures. Expectations call for output to rise 0.1 percent in the three months through March after shrinking in the fourth quarter, avoiding the onset of a technical recession. The probability of such an outcome has been enhanced by an equivalent reading on a closely-watched private sector estimate from NIESR, a London-based consultancy. Validation of a return to growth is likely to offer further support to front end UK bond yields, reinforcing Sterling's recent gains and offering scope for a continued advance. Needless to say, a downside surprise would go a long way toward deflating the currency's momentum.

With that in mind, it is important to note that the Pound's recent advance against the majors has likely produced the need for a corrective pullback or at least a period of digestion. With that GDP report not due until mid-week, that means the UK unit initially may find itself lacking for firm upside momentum. Indeed, a period of corrective weakness driven by near-term profit-taking appears reasonable. -IS

Euro Relief Rally Offers Selling Opportunity, Pound Eyes Key 1.6250

Talking Points

Euro: IMF Contributions To Total $500B, More Calls For ECB Rate Cut British Pound: Retail Sales Tops Forecast, 23.6% Fib In Sight U.S. Dollar: FOMC Interest Rate Decision In Focus, Round Ahead Euro: IMF Contributions To Total $500B, More Calls For ECB Rate Cut

The Euro rallied to 1.3222 as the International Monetary Fund looks to strengthen its lending capacity to further assist the European periphery, but we will stick with our bearish call for the EURUSD as the fundamental outlook for the region remains bleak. Indeed, European Union Monetary Affairs Commissioner Olli Rehn said China will increase its contributions to the IMF after meeting with China’s Vice Premier Wang Qishan, and the developments coming out of the Group of 20 meeting in Washington may continue to prop up the single currency European policy makers see commitments to the IMF rising up to $500B.

Meanwhile, French presidential candidate François Hollande argued that the ECB should implement further rate cuts to shore up the ailing economy, with World Bank President Robert Zoellick calling on the region to focus on growth, and we expect to see the Governing Council carry out its easing cycle throughout 2012 in an effort to stem the risk for a prolonged recession. As the bearish formation in the EURUSD continues to pan out, we may see the pair struggle to close above 1.3200, and the euro-dollar looks poised for a sharp decline as price action continues to approach the apex of the descending triangle.

British Pound: Retail Sales Tops Forecast, 23.6% Fib In Sight

The British Pound advanced to a fresh yearly high of 1.6130 following the upbeat retail sales report, and the recent strength behind the sterling should gather pace going into May as the fundamental outlook for the region improves. As the economic recovery in the U.K. gathers pace, we should see the Bank of England sound a bit more hawkish in the month ahead, and the Monetary Policy Committee may show an increased willingness to start normalizing monetary policy towards the end of 2012 amid the stickiness in underlying inflation. As the upward trending channel in the GBPUSD continues to play out, we are looking for a run to the 23.6% Fibonacci retracement from the 2009 low to high around 1.6250, and the British Pound outperform in the second-half of the year as the shift in the policy outlook props up interest rate expectations.

U.S. Dollar: FOMC Interest Rate Decision In Focus, Round Ahead

The greenback came under pressure on Friday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR)slipping to a low of 9,918, and the reserve currency may struggle to hold its ground throughout the North American trade as the rebound in market sentiment appears to be gathering pace. As the U.S. equity market extends the advance from the open, the risk in risk-taking behavior may continue to dampen the appeal of the greenback, but the reserve currency should track higher next week as we expect the Federal Open Market Committee to dampen expectations for more easing. As the FOMC rate decision comes into focus, we anticipate to see a less dovish policy statement amid expectations for a more robust recovery, and the central bank may ultimately raise its fundamental assessment for the world’s largest economy amid the resilience in private sector consumption.

Pound Surges on Strong Retail Sales Data Set

 20 April 2012 09:00 GMT  THE TAKEAWAY: UK retail sales improve on expectations -> Economic outlook improving but still delicate -> Strong data set bolsters Sterling

UK retail sales rose at the fastest pace in over a year as warm March weather boosted clothing and gardening equipment sales, the UK stats bureau reported today. March sales rose 1.5% on the month versus the expected 0.4% increase, and when compared to March 2011, sales increased 2.8% against the expected 1.3%. Panic caused by rising fuel prices also contributed to the strong showing.

The data added to optimism that the UK economy returned to growth in 2012’s first quarter. UK unemployment dropped for the first time in almost a year to 8.3% on the month, the stats bureau said earlier this week. However, with wages continuing to fall in real terms and firms remaining reluctant to hire, the foundations for a sustainable long-term recovery in retail spending remain shaky.

Meanwhile, the Bank of England continues to juggle growth stimulus against the rising threat of inflation. This week’s hawkish BOE minutes highlighted the inflation issue, and BOE member Tucker recently said CPI may not fall as fast as hoped, and described recent news on inflation as “bad.”The Minutes also said that although global economic recovery is proceeding broadly as expected, concerns out of the Eurozone are now greater if anything.

 Today’s retail sales data bolstered the pound against the US Dollar. Cable strengthened to a session high by 1.6116, and Sterling also gained against the Euro and Japanese Yen intraday.

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20 April 2012 09:00 GMT

¥ British Pound Unlikely to Find Clear Bearing in BOE Minutes, Jobs Data ¥

18 April 2012 07:22 GMT  Talking Points

Bank of England Minutes Unlikely to Signal Change in Policy Framework British Pound May See Muted Reaction to Increase in UK Jobless Claims Yen Sold as Asian Stocks Rise After IMF Upgrades 2012 Growth Outlook Minutes from April’s Bank of England policy meeting headline the economic calendar in European hours. Traders will look to the voting pattern on the rate-setting MPC committee to gauge the possibility of additional stimulus in the near term. Two votes in favor of further easing from known doves David Miles and Adam Posen represent the status quo, with anything more perceived as a shift in favor of further accommodation that is likely to weigh on the British Pound. Alternatively, an 8-1 or 9-0 outcome will probably prove supportive.

On balance, we suspect another 7-2 outcome coupled with neutral rhetoric is the path of least resistance, with most BOE officials waiting for February’s increase in asset purchases to be fully absorbed and an updated quarterly inflation report to be produced in May. Jobless Claims figures are also on tap, with expectations calling for a 6,000 increase in applications for benefits in March. A print in line with expectations doesn’t present a material change in overall labor market trends and so may not produce a meaningful response from price action.

The Japanese Yen slumped overnight – sliding as much as 0.7 percent against its leading counterparts – as a rally across Asian stock exchanges sapped safe-haven demand. The MSCI Asia Pacific regional benchmark equity index added 1.2 percent after the IMF upgraded its outlook for world economic growth in 2012. The fund now believes global output will add 3.5 percent this year, up from a January estimate of 3.3 percent. Importantly, this still marks a slowdown from the 3.9 percent increase recorded in 2011. The key features of the macroeconomic landscape – a pickup in the US against a backdrop of recession in the Eurozone and a slowdown in China – likewise remained in place.

Asia Session: What Happened

Westpac Leading Index (MoM) (FEB)

ANZ Consumer Confidence Index (APR)

ANZ Consumer Confidence (MoM) (APR)

Euro Session: What to Expect

Euro-Zone Current Account n.s.a. (€) (FEB)

Euro-Zone Current Account s.a. (€) (FEB)

Average Weekly Earnings (3M/YoY) (MAR)

Weekly Earnings ex Bonus (3M/YoY) (MAR)

ILO Unemployment Rate (3M) (FEB)

Euro-Zone Construction Output s.a. (MoM) (FEB)

Euro-Zone Construction Output w.d.a. (YoY) (FEB)

Credit Suisse ZEW Survey (Expectations) (APR)

Critical Levels

>> Yen Weaker on Dovish BoJ, Pound Stronger on Increasingly Hawkish BoE

Fundamental Headlines

- Jobs Data Simultaneous Release Jeopardized Under Curbs – Bloomberg

- Jordan Named SNB President Takes up Fight to Defend Franc – Bloomberg

- Argentine Move to Seize YPF Spoils Sinopec Deal – Reuters

- German Two-Year Debt Costs Hit Low – WSJ

- IMF Says Recovery Remains Fragile – WSJ

European Session Summary

While price action in the Asian session was clearly constructive and supportive of risk-positive sentiment, European traders brought a different attitude to work on Wednesday and the progress made by higher yielding currencies and risk-correlated assets was soon wiped out. The biggest moves come from the British Pound and the Japanese Yen, which, like the Canadian Dollar, have seen some indications of significant policy moves in the coming months from their respective central banks.

In terms of the Japanese Yen, it was the weakest major currency midway through the Asian session by a wide margin – the USDJPY had climbed by at least 0.60 percent – as Asian market participants seemingly rejoiced and chased the outstanding rally by the S&P 500 on Tuesday (its best in one month). The desire to trade in the low yielding currency for higher yielding assets was further supported after the Bank of Japan suggested that more easing may be necessary, even as the global economy shows signs of progress.

BoJ Deputy Governor Kiyohiko Nishimura’s comments that the BoJ is “committed to implementing additional easing measures, if deemed necessary” support recent technical moves by the USDJPY, which are starting to suggest that the USDJPY correction is finished and we’re set for the next major leg higher. If the BoJ is planning on implementing additional easing – seemingly ready to intervene at a moment’s notice – the Japanese Yen will weaken under the threat of this verbal intervention.

Like the Yen, the British Pound has been tossed around by market participants struggling to discern the direction of the Bank of England’s monetary policy. However, unlike the Yen which remains under pressure given the BoJ’s dovish stance, the Pound found significant support earlier in the day after the Bank of England minutes showed that Monetary Policy Committee member Adam Posen abandoned his stance for more easing. If the BoE is going to withdraw stimulus measures, or at least at the minimum attempt to communicate its desire to normalize monetary policy, the British Pound stands to gain substantially over the coming weeks.

Taking a look at credit, there is little rhyme or reason in the breakdown of how European sovereign debt has performed; Spanish debt is among the top performers while Italian and Portuguese debt have been the leading decliners. We now look to the 10-year Spanish bond auction tomorrow to see how confident market participants are in the Spanish government’s reforms.

GBPUSD 5-min Chart: April 18, 2012

 

Charts Created using Marketscope – Prepared by Christopher Vecchio

Overall, the British Pound was the best performing major currency after the BoE minutes, gaining 0.32 percent against the US Dollar. All of the other majors fell against the US Dollar with the Japanese Yen and New Zealand Dollar leading the decliners, down 0.61 percent each. The Swiss Franc is also weaker, down 0.50 percent, after SNB President Thomas Jordan reaffirmed the SNB’s commitment to the EURCHF floor.

24-Hour Price Action

24-Hour Price Action

Key Levels: 12:55 GMT

 Key Levels: 12:55 GMT

 Thus far, on Wednesday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading higher, at 9968.49 at the time this report was written, after opening at 9939.85. The index has traded mostly higher, with the high at 9971.80 and the low at 9936.81.

""" British Pound Outlook menacé par la BoE Minutes, CPI

14 April 2012 04:17 GMT 

Fundamental Forecast for British Pound: Neutral

The British Pound had a particularly weak past five days, although most of the downside came against the commodity currency complex and the Japanese Yen. The Sterling lost 1.03 percent to the Yen, while losing 0.75 percent and 0.60 percent to the Australian and New Zealand Dollars, respectively. Considering the performance of the UK Gilts this past week (yields fell), it’s of little surprise that the Pound was under pressure (falling yields reduce a currency’s appeal). With respect to global risk trends, the British Pound could be due for a solid bounce against the commodity currencies as global growth prospects continue to ease; but with the Bank of England looming, we could see the Pound drop against the Japanese Yen and the US Dollar.

In light of Standard & Poor’s confirmation of the United Kingdom’s ‘AAA’ rating, it is clear that there has been a dynamic shift in the structure of the British economy that has made it relatively more secure than other European economies. Taking this into consideration, it is evident that British fundamentals are improving: growth hasn’t tanked in the face of austerity; the labor market is relatively stable; and inflation continues to cool. While Standard & Poor’s has recognized this, other rating agencies have not: Fitch Ratings and Moody’s Investor Services both have the United Kingdom’s top ‘AAA’ rating on a “negative outlook.”

Any confusion that these differing views offer should be made clearer after the release of the Bank of England minutes on Wednesday. While there was no statement accompanying the rate decision, we do know that there are still some prominent doves on the Monetary Policy Committee – at least two of the nine – that are calling for an expansion of the BoE’s asset purchase program (APP). Perhaps there is an argument to be made: inflation has cooled in recent months but any excess growth gained from improved purchasing power among consumers has been wiped out by fiscal austerity. Thus, while we typically refer to the BoE minutes as the most important event this week, we turn to the release of the consumer price index for March.

Ahead of the minutes (which won’t reflect the new inflation data) the consumer price index for March is due, and the forecasts look promising for the aforementioned dovish policymakers. The headline year-over-year figure is expected to remain steady at 3.4 percent (month-over-month forecasted to drop to 0.3 percent from 0.6 percent in February) but the more important gauge – the core reading that excludes food and energy costs – is expected to slip to 2.3 percent y/y from 2.4 percent y/y.

If inflation is going to continue to meander lower, it is likely that BoE policymakers reignite their quantitative easing operation to purchase another £50 billion in the months ahead. By no means is the British economy out of the woods – at least two of the major rating agencies would agree. Whereas we expect the Pound to appreciate against the commodity currencies in the days ahead, more talk of QE will hurt the Pound’s prospects against the Japanese Yen and the US Dollar. – CV

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14 April 2012 04:17 GMT

^^ British Pound Outlook Threatened By Slower Growth, Inflation ^^

Fundamental Forecast for British Pound: Bullish

• GBPUSD: Looking for Short Entry Opportunities
• GBPUSD Corrective Advance Expected
• British Pound Likely to Fall Further

The British Pound bounced back during the holiday trade to maintain the upward trend from earlier this year, but we may see the sterling struggle next week as the economic docket is expected to reinforce a weakened outlook for the U.K. As the event risks on tap for the following week are anticipated to dampen the prospects for growth and inflation, a slew of dismal developments could spark a sharp selloff in the exchange rate, and we may scale back our bullish forecast for the GBPUSD should the exchange rate slip back below interim support around 1.5800.

At the same time, we will be closely watching the fresh batch of commentary from Bank of England official Adam Posen as he continues to push for another GBP 25B in quantitative easing, but we may see the board member soften his dovish tone for monetary policy as the central bank anticipates to see a more robust recovery later this year. Although the Monetary Policy Committee refrained from releasing a policy statement after maintaining its current policy stance in April, the board said it would take another month to complete the GBP325B in bond purchases, but it seems as though the MPC is looking to conclude its easing cycle this year as the committee now see a limited risk of undershooting the 2% target for inflation. Indeed, the shift in the policy outlook should continue to prop up the sterling as market participants scale back bets for more quantitative easing, and we may see the British Pound outperform against its major counterparts as interest rate expectations pick up.

As the GBPUSD appears to be carving out a higher low around 1.5800, the pair could be building a base for a sharp move to the upside, and we may see the exchange rate make another run at 1.6000 should the developments coming out of the U.K. dampen expectations for more QE. In turn, it looks as though the upward trending channel will continue to take shape in April, and we will maintain a bullish outlook for the British Pound as the BoE raises its fundamental assessment for the region. – DS

Pound Sterling Gets a Lift as Additional QE Chances Evaporate

Sentiment on OpenBook for the EUR/GBP, which is at this writing trading at 0.8373, is bearish with short positions outnumbering longs by 2 to 1. Trader PPvijayakumar, who is the go-to guru for this pair, has allocated 100% of his portfolio to the EUR/GBP over the past three months. He currently holds several recently opened short positions, one of which is already showing a profit of 16.5% and has a TP of 0.8272, which is only about 100 pips a way. Other opens long positions would need a strong Euro rally to turn them into a gain, an event unlikely at the present time.

The Pound Sterling, which has seen a downtrend in recent weeks as investors worry over the U.K. economy and the prospect of a double-dip, has gotten a boost from the Bank of England. It appears that the prospects of any additional quantitative easing from the U.K. central bank, above and beyond the recently pledged £50 billion QE, is likely off the table for a while. The Bank earlier released its January inflation forecast and expects that inflation will reach 1.8% within two years. The December report had inflation expectations pegged at around 1.6%, which was higher than November’s 1.3% projections.

The growth outlook is expected to remain somewhat weak, with 3.0% annualized growth forecast within two years, but could strengthen more as households’ real incomes improve. The good news is that the U.K. should be able to skirt a recession, though its symbiotic relationship with the Eurozone could certainly change the dynamics.

Ahead of the Bank of England report, trader padveblo closed out a string of hedged positions in the EUR/GBP pair earlier today, with returns ranging from 15.60% to 94.20%. This trader’s allocation to the pair over the last six months has been nearly 30% of the portfolio, while the recorded gains have been almost 28%.

The BoE expects that inflation will continue to moderate over the long term, but said that energy prices and the affect of the current high unemployment’s effect on industries’ bottom lines were making it more difficult to gauge the pace. Given that, the members of the Bank’s Monetary Policy Committee have wide-ranging view of the impact of those factors.

Pound Sterling Traders Bullish Resolve Holds Despite Mixed Data

Early this morning, the GfK Group released its key consumer confidence index for January, which is a gauge of confidence levels for the U.K.’s economic activity among the 2000 respondents. The reading improved to -29 from -33, beating analysts’ forecast of -32 yet far off the May “peak” of -21. The managing director of the group which conducts the survey on behalf of the E.U. Commission said that the improvement was somewhat surprising given the decline in U.K. GDP and the strong possibility that the economy is on the verge of another recession. However, he points to a decline in inflation and the recent lowering of energy prices as offering some hope to consumers.

OpenBook guru PPVijayakumar who is almost exclusively a EUR/GBP trader with 99.4% of his portfolio allocation, has consistently and successfully been able to scalp both sides of the pair and his statistics show that he is on track to post a 202% gain for the past six months. With 99.1% of all of his trades being positive, it’s understandable why this guru is regularly atop the leader board. Currently, the EUR/GBP pair is trading at .8373 and a bullish sentiment dominates on OpenBook.

Santosh is another guru who also primarily trades the Pound Sterling, though against the U.S. Dollar, with more than 64% of his portfolio allocated to the GBP/USD pair. He has several long positions opening the pair but would need a good bull rally to see them turn a profit. Nonetheless, nearly 99% of trades result in a profit for this trader who, in response to a question from a follower, admits that he avoids a fixed formula or strategy, but rather adapts his approach to the market’s behavior. Moreover, he doesn’t trade with more than 10% of his equity and uses a hedging strategy to maintain equity.

The GBP/USD pair is currently higher at 1.5751, but off the intra-day high of 1.5774; news from the Bank of England that net lending to individuals failed to meet expectations may put pressure on the pair. The report showed that lending rose from £0.6 Billion to £0.7 Billion while analysts surveyed had predicted an increase to £0.8 Billion. The Bank also reported that December’s mortgage approvals remained flat against expectations of an increase to 54,000.

 

Pound Sterling Traders Bullish Resolve Holds Despite Mixed Data

Early this morning, the GfK Group released its key consumer confidence index for January, which is a gauge of confidence levels for the U.K.’s economic activity among the 2000 respondents. The reading improved to -29 from -33, beating analysts’ forecast of -32 yet far off the May “peak” of -21. The managing director of the group which conducts the survey on behalf of the E.U. Commission said that the improvement was somewhat surprising given the decline in U.K. GDP and the strong possibility that the economy is on the verge of another recession. However, he points to a decline in inflation and the recent lowering of energy prices as offering some hope to consumers.
OpenBook guru PPVijayakumar who is almost exclusively a EUR/GBP trader with 99.4% of his portfolio allocation, has consistently and successfully been able to scalp both sides of the pair and his statistics show that he is on track to post a 202% gain for the past six months. With 99.1% of all of his trades being positive, it’s understandable why this guru is regularly atop the leader board. Currently, the EUR/GBP pair is trading at .8373 and a bullish sentiment dominates on OpenBook.
Santosh is another guru who also primarily trades the Pound Sterling, though against the U.S. Dollar, with more than 64% of his portfolio allocated to the GBP/USD pair. He has several long positions opening the pair but would need a good bull rally to see them turn a profit. Nonetheless, nearly 99% of trades result in a profit for this trader who, in response to a question from a follower, admits that he avoids a fixed formula or strategy, but rather adapts his approach to the market’s behavior. Moreover, he doesn’t trade with more than 10% of his equity and uses a hedging strategy to maintain equity.
The GBP/USD pair is currently higher at 1.5751, but off the intra-day high of 1.5774; news from the Bank of England that net lending to individuals failed to meet expectations may put pressure on the pair. The report showed that lending rose from £0.6 Billion to £0.7 Billion while analysts surveyed had predicted an increase to £0.8 Billion. The Bank also reported that December’s mortgage approvals remained flat against expectations of an increase to 54,000.