GBP/USD subdued ahead of BoE's decision | Dukascopy Bank SA (2025)

Note: This section contains information in English only.

Thu, 14 Jan 2016 08:59:54 GMT

Source: Dukascopy Bank SA

  • The share of sell orders remains unchanged at 57%
  • 63% of all open positions are long
  • Immediate resistance is represented by the weekly S1 at 1.4414
  • The Bollinger band and the monthly S2 around 1.4380 are the nearest support
  • 65% of traders reckon GBP/USD will be at 1.50 or lower in three months
  • Upcoming events: MPC Official Bank Rate, UK Asset Purchase Facility, US Jobless Claims, US Import Prices, FOMC Member Bullard Speech

GBP/USD subdued ahead of BoE's decision | Dukascopy Bank SA (1)

© Dukascopy Bank SA

On Wednesday the Pound's losses exceeded its gains against most major peers. The largest loss accounted for 0.46% versus the Euro, whereas the largest gain – only 0.27% versus the Loonie. Nonetheless, the Sterling also appreciated against other commodity currencies, namely 0.15% versus the Aussie and 0.09% against the Kiwi. The GBP/CHF remained relatively unchanged, edging 0.07% higher, while the British currency dropped 0.28% and 0.25% against the US Dollar and the Yen, respectively.

UK manufacturing and industrial production both dropped unexpectedly in November, according to the Office for National Statistics. Industrial production declined 0.7% in the reported month from October, dragged down by a fall in manufacturing and a drop in North Sea gas extraction, marking the biggest monthly decline since early 2013. At the same time, manufacturing output slid 0.4% against economists' expectations for a 0.1% increase. Measured on an annual basis, manufacturing production shrank 1.2%, marking its fifth straight month of contraction. Economists, however, had predicted a 0.8% slide. Nevertheless, manufacturing production continued to grow on a quarterly basis, climbing 0.5% in the three months to November, the biggest increase since October 2014, and compared with the 0.3% growth in the quarter to October. Still, factory production remained 6.1% below the pre-crisis level peak seen in the first quarter of 2008.

The decrease signalled that the British economy slowed toward the end of 2015 and remains largely reliant on consumer spending and the services sector for growth. The recent data suggest that the UK manufacturing industry will make only a marginal positive contribution to broader economic growth in the fourth quarter of 2015.


Watch More: Dukascopy TV

BoE Rate Decision is the main Cable driver today

Today the UK fundamentals take the stage, being that only the US Jobless Claims could have some impact on the GBP/USD among other economic data releases. The Initial Jobless Claims are released by the US Department of Labor. They measure the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. Despite improvements expected in the labor market today, the specific data release tends to have a mild reaction on the markets; therefore, attention should be paid to the BoE's Monetary Policy Summary. MPC members are to vote on rising or holding interest rates today at 12:00 PM GMT. No changes are expected since the meeting in December, but more information concerning the future interest rate hike is likely to be provided and, thus, cause positive volatility.

Read More: Fundamental Analysis


Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably at the beginning 2016."


GBP/USD subdued ahead of BoE's decision

The British currency extended its bearish trend for another day yesterday, but with the immediate support cluster limiting the losses just above 1.44. The GBP/USD is now under the risk of breaching the monthly S2, with a sell-off towards the six-year low likely to be triggered afterwards. However, a the Pound is expected to react positively on today's interest rate decision and reverse the trend, after having fallen for more than two weeks. Immediate resistance, namely the weekly S1, does not play an important role in limiting the gains today; thus, the 1.45 level might be retaken.

Daily chart

GBP/USD subdued ahead of BoE's decision | Dukascopy Bank SA (2)

© Dukascopy Bank SA


The GBP/USD retested the channel's lower border on Wednesday, but the rebound was insufficient to reach the upper trend-line once more. The pair is somewhat consolidating around the 1.44 level, but a breakout is expected to occur to the upside. However, the 200-hour SMA lies out of reach for the time being.

Hourly chart

GBP/USD subdued ahead of BoE's decision | Dukascopy Bank SA (3)

© Dukascopy Bank SA

Read More: Technical Analysis

Bulls remain strong

Bulls remain strong, as 63% of all open positions are long. The share of sell orders remains unchanged at 57% for the third day in a row.

Meanwhile, other market participants have somewhat similar outlooks towards the GBP/USD, such as OANDA. At the moment 62% of OANDA traders hold long positions; however, among SAXO Bank traders, the majority sees the Sterling falling against then US currency, as 51% of them are short the Pound.

Spreads (avg, pip) / Trading volume / Volatility

Majority sees GBP/USD below 1.50 in three months

GBP/USD subdued ahead of BoE's decision | Dukascopy Bank SA (4)

© Dukascopy Bank SA


The majority of traders (65%) still believe the British currency is to cost 1.50 or less dollars after a three-month period. The most popular price interval was selected by 28% of the voters, namely the 1.42-1.44 one, while the second most popular choice implies the Pound is to cost between 1.50 and 1.52 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for April 14 is 1.4779.

Read More: Community Forecasts


Although traders' sentiment improved, a significant number still expect a bearish development, namely 60% of them, compared to 71% last week.

One of the traders of the Dukascopy Community believes the Pound could still outperform the US dollar. This trader, babanu, says that in his opinion "the Sterling might look overextended".

At the same time, on the bearish side of the barricade Jignesh suggests that the markets are showing signs of broad based strength in the USD this week. "The GBP has just made a major stop run to take out 2015 lows," he commented, adding that "selling pressure may be a bit lighter here, as the pair starts to approach major yearly support and accumulation may start to occur for the pair".

GBP/USD subdued ahead of BoE's decision | Dukascopy Bank SA (5)

© Dukascopy Bank SA

Back to articles

Actual Topics

Thu, 14 Jan 2016 09:31:03 GMTUSD/JPY on the verge of breaking the up-trend completelyThe US Dollar's performance on Wednesday was rather formidable, as it appreciated against most major peers, with exception versus the Euro.
Thu, 14 Jan 2016 08:01:15 GMTGold rebounds as equity markets turn redAs the American Dollar weakened by the end of trading session on Wednesday, precious metals managed to capitalise on this development.

Subscribe to "Fundamental Analysis" feed

تسجيل
GBP/USD subdued ahead of BoE's decision | Dukascopy Bank SA (2025)
Top Articles
Latest Posts
Recommended Articles
Article information

Author: Melvina Ondricka

Last Updated:

Views: 6481

Rating: 4.8 / 5 (68 voted)

Reviews: 83% of readers found this page helpful

Author information

Name: Melvina Ondricka

Birthday: 2000-12-23

Address: Suite 382 139 Shaniqua Locks, Paulaborough, UT 90498

Phone: +636383657021

Job: Dynamic Government Specialist

Hobby: Kite flying, Watching movies, Knitting, Model building, Reading, Wood carving, Paintball

Introduction: My name is Melvina Ondricka, I am a helpful, fancy, friendly, innocent, outstanding, courageous, thoughtful person who loves writing and wants to share my knowledge and understanding with you.