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GBP/USD Forecast 31 May 2013

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GBP/USD Chart 31/05/2013
4.8/5 of 3 ratings

Where is the Pound Sterling Headed?

In our daily forecast during the last trading day of the week we will tempt our fellow binary options traders to take a look at the opportunities the GBP/USD pair is providing. The Pound Sterling closed in NY at $1.5233 after rate had followed euro-dollar's short covering recovery. The rate moved up from around $1.5111 to a high of $1.5238 before easing into the close.

Disappointing print in US weekly jobless claims

A rather disappointing print in US weekly jobless claims and a faint downside revision to headline US Q1 GDP data incited another leg of dollar weakness, with traders having in mind that most end month models expect some dollar sales to be seen at Friday's fixings.

The British Pound was able to play catch up on the euro-dollar move in NY, ending the session between stg0.8560/70 into the NY close. Early demand into Asia saw cable extend highs to $1.5240 before it was pushed lower off to $1.5216 into the Asian afternoon, settling between $1.5218/28 ahead of the European open. With the rate currently trading at around 1.5194, recovering from European lows set at 1.5185.

Economists widely consider outgoing Bank of England Governor Mervyn King to have done a pretty good job in the turbulent times of his governance, and a full decade in office. For now though Mr. King is unlikely to leave with a new round of fresh stimulus for the economy.

Participants in a Reuters poll taken this week, do not anticipate any change to the Bank Of England’s 375 billion pound quantitative easing program when the Monetary Policy Committee meets next week for the final time under Governor King on June 6. Chances are not many more money printing will occur this year. The median likelihood of an increase in the bond purchasing program have fallen in recent polls and now stand below 50 percent.

At this point in time we remain biased to sell rallies in the pair, as the Pound Sterling offers the worst real yields in the G10. Meanwhile, we tend to be bullish on the USD as the composition of flows to the US stock markets has been changing over time and this trend is only likely to continue.

The flows should shift from safe heaven bond buying to unhedged equity and foreign direct investments, thanks to the US’s comparatively bright growth and investment outlook. However should we see a sustained daily close above 1.5255 we could see another leg higher in the pair, so traders should mind this scenario.

Looking at the chart we see last couple of days’ rally as a corrective in nature. We would be definitely selling puts if we breach below 1.5180 on a sustained hourly basis, however we believe there will be better opportunities to do so on a potential test of 1.5240.

Having in mind the calendar, some fresh fundamental factors could influence the price on the announcement at 13:30 GMT of Personal Spending and Personal Income data, which coupled with PCE Inflation will take through the start of the US session.

Closer to the end of the European session and more important to the markets could be the release of Chicago PMI numbers, expected to be at the 50 mark (13:45 GMT) and Reuters/Michigan Consumer Sentiment number expected to be reported at 83.7 (13:55 GMT).

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