GBP/USD for Monday, December 9, 2013
After moving well last week getting within reach of 1.6450, the GBP/USD eased back to finish out last week to find support and settle around the 1.6350 level. A couple of weeks ago it did well to break through the long term resistance level at 1.6250 which had established itself as a level of significance over the last few months. Over the last few weeks or so the pound has bounced strongly off the support level at 1.59 to return back to its present levels. Towards the end of October the GBP/USD slowly drifted lower from the strong resistance level at 1.6250 and down to a three week low just around 1.5900 which was recently passed as the pound moved down towards 1.5850 only a week ago. For the week or so before that the pound moved well from the key level at 1.60 back up to the significant level at 1.6250, only again for this level to stand tall and fend off buyers for several days. Throughout September the pound rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250 several weeks ago. In the first week of October the pound was easing back towards 1.60 and 1.59 where it established a narrow trading range between before surging back to 1.6250 again.
Back in the middle of August the pound surged higher to through the resistance level at 1.56 to a then two month high around 1.5650, before spending the next few days consolidating and trading within a narrow range around 1.5650, receiving support from the key 1.56 level. A couple of months ago the resistance level at 1.54 was proving to be quite solid, and once it broke through the pound surged higher to a new seven week high near 1.56 in a solid 48 hour period run. In the week leading up to this the pound had recovered strongly and returned to the previous resistance level at 1.54 after the week earlier undoing some of its good work and falling away sharply from the resistance level at 1.54 back down to around 1.5150 and a two week low. A few weeks ago the 1.54 resistance level stood firm and the pound fell away heavily, however the 1.51 support level proved decisive and helped the pound rally strongly.
Earlier in July after having done very little for about a week, the GBP/USD started to move and surge higher and move through the 1.52 and 1.53 levels to the one month high above 1.54. Prior to the move higher, it moved very little as it found solid support at 1.51 and traded within a narrow range above this level. It established a trading range in between 1.51 and 1.52 after it took a breather from its excitement just prior when it experienced a strong surge higher moving back to within reach of the 1.52 level from below 1.49, all in 24 hours. About a month ago it did well to climb off the canvas and move back above 1.49 and towards 1.50 again before seeing the pound reverse and head back down below 1.49 to reach a new multi-year low near 1.48. It experienced sharp falls moving from 1.53 down to the key long term level of 1.50 and then through 1.49. That movement saw it resume its already well established medium term down trend from the second half of June and move it to a four month low.
George Osborne has hit back at fears the UK’s economic recovery is based solely on a boom in consumer spending. The chancellor said exports and investment were also picking up – but there was still work to be done to create a more “balanced” economy. He delivered an upbeat Autumn Statement on Thursday, claiming critics of his austerity plan had been proved wrong. But Labour accused him of complacency amid claims from a leading think tank that Britain is still in a “big hole”. In its verdict on Mr Osborne’s plan to get Britain back in the black by 2018, the Institute for Fiscal Studies (IFS) said higher growth forecasts “hide some more disappointing news for the chancellor”.
And some of Mr Osborne’s spending promises, such as free school meals, are unfunded after 2015, it added.
(Daily chart / 4 hourly chart below)
GBP/USD December 8 at 23:25 GMT 1.6343 H: 1.6353 L: 1.6341
George Osborne has hit back at fears the UK’s economic recovery is based solely on a boom in consumer spending.
The chancellor said exports and investment were also picking up – but there was still work to be done to create a more “balanced” economy.
He delivered an upbeat Autumn Statement on Thursday, claiming critics of his austerity plan had been proved wrong.
But Labour accused him of complacency amid claims from a leading think tank that Britain is still in a “big hole”.
In its verdict on Mr Osborne’s plan to get Britain back in the black by 2018, the Institute for Fiscal Studies (IFS) said higher growth forecasts “hide some more disappointing news for the chancellor”.
And some of Mr Osborne’s spending promises, such as free school meals, are unfunded after 2015, it added.
The post UK Chancellor Confident in Economic Recovery appeared first on MarketPulse.
Increasing demand for manufactured goods drove global factory activity higher last month but the spurt in the euro zone masked a widening disparity among some of the bloc’s key members.
As year-end approaches, the global economy is showing signs of a more solid recovery, with encouraging signs from some economies, particularly Britain, of an acceleration.
But growth in Europe’s 17-nation currency union remains weak and Markit, compiler of the monthly Purchasing Managers’ Indexes, said on Monday that there was evidence of a renewed downturn in France and Spain.
Markit’s Eurozone Manufacturing PMI rose to 51.6 last month from October’s 51.3, a two-year high, just pipping an earlier flash reading of 51.5, and the fifth consecutive month showing growth. The output index nudged up to 53.1 from 52.9.
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The Bank of England said on Thursday that it would heavily scale back a scheme launched last year to boost mortgage lending, as house price inflation looks set to accelerate further.
Britain’s economy has staged an unexpected turnaround since the BoE launched the Funding for Lending Scheme with Britain’s finance ministry in July 2012 to help increase lending to home-buyers and businesses.
The scheme will now focus solely on enabling greater lending to small firms that still find it hard to borrow.
“Although the growth in household loan volumes remains modest, activity is picking up and house price inflation appears to be gaining momentum,” BoE Governor Mark Carney said in a letter to finance minister George Osborne, who backed the move.
Earlier this week Carney faced questions from lawmakers who are worried that a house price bubble is in the making, and that Britain’s economic recovery is hampered by a lack of lending to small firms.
The post Bank of England Says Housing Market Does Not Need Further Funding appeared first on MarketPulse.
Brazil’s central bank has raised its benchmark interest rate to 10% from 9.5%, the sixth time in a row that it has put up borrowing costs.
The latest rise has taken the key rate to the highest level since March 2012.
The rises come as Brazil has been trying to rein in inflation. Consumer prices in the country rose by 5.8% in October from a year earlier, above policymakers’ 4.5% target.
Prices have been rising in part due to the fall in the Brazilian currency.
The Brazilian real has fallen nearly 20% against the US dollar since May this year.
The decline has been blamed on an outflow of capital triggered by speculation that the US Federal Reserve will taper its stimulus policy, leading to a stronger dollar.
The Fed has used the programme, known as quantitative easing, to increase the money supply and improve liquidity in the financial system.
A part of that increased liquidity flowed to emerging economies, triggering a surge in stock and asset prices over the past few years.
But fears that the US may scale back the programme has seen investors pull out money from emerging nations such as Brazil, hurting their currencies.
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apan’s main stock index has closed at its highest level for nearly six years, tracking overnight gains on Wall Street and buoyed by a weak yen.
The Nikkei 225 rose 1.8% to 15,727.12 points, the highest level since December 2007.
The index has surged nearly 50% this year after a series of aggressive moves by policymakers to help boost growth.
The measures have resulted in a fall in the yen’s value, lifting exports and boosting profits of exporters.
The Japanese currency has dipped nearly 25% against the US dollar since the start of this year.
That makes Japanese goods more affordable for foreign buyers and boosts profits of exporters when they repatriate their foreign earnings back home.
The post Japan’s Stock Market Hits Six Year High appeared first on MarketPulse.
U.K. 10-year bond yields fell to the lowest level in more than a week as investors awaited publication tomorrow of minutes of the Bank of England’s November meeting, which will show how policy makers voted.
Benchmark gilts swung between gains and losses after the Debt Management Office sold 3.75 billion pounds ($6.04 billion) of 10-year securities in the first of two sales this week. The pound was little changed versus the dollar after the Organisation for Economic Co-operation and Development said Britain’s property market may be facing a bubble, even as it raised its U.K. growth forecasts. The central bank’s Monetary Policy Committee kept interest rates at a record low on Nov. 7.
“We have the MPC minutes tomorrow where we will see what the policy discussion was like,” said Marc Ostwald, a strategist at Monument Securities Ltd. in London. “The auction was taken down easily and that’s given the market a bit of a boost. Gilts have a generally healthy bid to them. The focus now turns to the next auction on Thursday.”
The post U.K. Bond Yields Fall Before BOE Minutes appeared first on MarketPulse.
Shifting the BoE job threshold of +7% seems to have already begun. It started this week following the UK inflation report and has since been backed by BoE member Weale. He is the only policymaker to vote against the terms of the Bank’s forward guidance plan launched in the summer. He has indicated that it’s very possible that the “Old Lady” may keep their benchmark-lending rate at +0.5% even when unemployment happens to fall below the current desired threshold.
Like any other Central Bank, the BoE cannot ignore increases in inflation expectations, which in the UK have picked up. British policy makers may need to raise interest rates before all spare capacity in the economy is actually used up. Inflation in the UK has been running above the Bank’s desired target of +2% for many years. Why? This has occurred mostly on the back of policymakers concentrating on getting the UK economy kick started by any means possible. They have been doing the same as Fed and the BoJ, applying quantitative easing- slashing interest rates and buying government bonds – keeping cash cheap and plentiful.
Last month inflation in the UK happened to fall sharply to +2.2%, which has allowed the BoE to revise down its future forecasts this week for CPI. As it tries to support Britain’s economic recovery, the BoE will only consider raising interest rates from their record low of +0.5% once unemployment falls below +7% threshold. This percentage level was chosen as a “simple” measure for the public, so they could understand. However, the timing of raising rates is still an unknown entity.
Everything is still data dependent and the market is currently speculating on a 2015 rate move. BoE policy makers could easily shift the +7% threshold lower if Governor Carney and company does not believe a rate hike is warranted. UK monthly employment numbers will continue to be keenly watched.
- German Policy Maker Warns on Low Rate Driven Bubbles -
- Greek Finance Minster Warns Austerity is Dangerous -
- Ireland to Repay Bailout Loans in December -
- UK Government Approves £4 Billion Oil Field Investment -
- European Stocks Higher On US Stimulus Bet Despite Slower German and French Economies -
- Europe Adopts Austerity Budget -
- Russian Growth Forecasted at 1.5–1.6 Percent -
- ICAP Claims No Brokers Were Part of FX Manipulation -
- European Industrial Production Drops 0.5 Percent in September -
- Drop in UK Unemployment Forces BoE to Expect Higher Rates in 2015 -
- UK Jobless Falls to Three Year Low -
- Bank of England Confident About Recovery -
- France Key For Euro Survival – Blackrock -
- ECB’s Nowotny Warns of Stagnation Risk -
- UK Inflation Could Force BoE To Earlier Hike -
- UK Inflation Drops 2.2 Percent -
- Alan Greenspan Says Europe Needs Political Union -
- European Data Confirms Draghi Rate Cut Policy -
- Greek Goverment Survices No-Confidence Vote -
- Euro Zone Inflation Could Trigger Japan Style Deflation -
- German Politicians Reach Agreement on Banking Union -
- ECB’s Coeure: Crisis Responsible For Driving Low Rates -
* EUR German ZEW Survey (Economic Sentiment)
* USD Advance Retail Sales
* USD Consumer Price Index
* USD Fed Releases FOMC Minutes
* JPY Bank of Japan Rate Decision
* CAD Consumer Price Index
The post Week in FX Europe – BoE Shifting The Goal Posts? appeared first on MarketPulse.
Nissan will reconsider its investment in the UK if Britain leaves the European Union, chief executive Carlos Ghosn has told the BBC.
He was speaking in Sunderland, where Nissan employs 6,500 workers.
Prime Minister David Cameron has promised a public vote on EU membership in 2017 if the Conservatives win the next general election in 2015.
But Mr Ghosn also added that he considered the exit scenario to be unlikely.
When asked how Nissan would react if the UK were to leave the EU, Mr Ghosn said: “If anything has to change, we [would] need to reconsider our strategy and our investments for the future.”
The post Nissan CEO Would Reconsider Business Strategy if UK Exits EU appeared first on MarketPulse.
The euro zone’s economic recovery lost a little momentum last month, according to surveys that showed only modest growth in German and French businesses.
Data from non-euro zone Britain impressed again, however, and German industrial orders jumped underlining the uneven nature of overall European recovery.
Wednesday’s purchasing managers’ indexes (PMIs) from Markit showed the pace of growth in euro zone businesses slipped last month, although not nearly as badly as first projections.
Taken as a whole, the indexes pointed to fragile economic growth that will do little to ease the pressure on the European Central Bank to take some action, although not perhaps at its policy meeting on Thursday.
With surprisingly low inflation last month, speculation in markets and among economists has grown that the ECB is primed to stimulate the economy again – perhaps next month.
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