Pound Forecast to Extend Decline Against Indian Rupee

Pound Forecast to Extend Decline Against Indian Rupee

Unknown   7:21 AM

The GBP/INR exchange rate traders lower at the start of the new month being quoted at 83.22; the exchange rate started February at 85.23, confirming momentum to be negative.
Concerning the outlook, our technical studies suggest weakness is likely to extend over coming days and weeks.
Overall the exchange rate is forming a symmetrical triangle on the weekly chart, with the probabilities slanted to a break lower once completed.
It is currently unfolding the ‘d’ wave of the triangle, which looks unfinished and will probably move lower, finishing at the bottom of the pattern at around the 82.4000 level.

Normally triangles have five composite waves (a-e) so given this triangle is still forming wave ‘d’ it still has some way to go before it completes.
The dominant downtrend indicates a higher probability that the triangle will break lower than higher.
Often triangles compromise the penultimate move within a bigger trend, which could mean that there may only be one more wave of selling before the bigger downtrend ends.
A break below the 81.65 lows would confirm a breakout lower, towards a target at roughly 77.50, calculated from extrapolating the height of the triangle at its widest point down from the break, and because it is a major round number and therefore is expected to attract a higher-than-average amount of demand.

Indian GDP Beats Expectations

Data out on Tuesday showed India GDP data for Q4 2016 surprising to the upside.

The data showed growth of 7.0% which was above the 6.5% consensus estimate and was all the more surprising because economists had expected growth to be severely curtailed by the authority’s decisions to remove from circulation high denomination notes during the autumn.

Demonetization, as it was called, was aimed at encouraging Indians to use banks and shift the country away from a predominantly cash economy.

It was expected to hurt the economy given the large amounts of cash which were taken out of circulation and deposited in bank accounts or simply lost because people failed to convert their notes before the decommissioning deadline.

The rate of growth beat estimates from the IMF, the Bank of India and the OECD.

The OECD noted that India stood out as an example for other economies given its extraordinarily strong growth rate.

“Paris-based think tank OECD had today said, “India has been a star performer in gloomy times. We do not have many cases of 7 per cent growth… It is a top reformer among all the G-20 countries,” said the Indian Express.

The OECD’s Secretary General Angel-Gurria added that the government must keep up its pace of reform.

“Complimenting India for its initiatives towards modernising bankruptcy laws and giving states power to undertake reforms, OECD Secretary-General Angel Gurria told media, “There is no time for complacency. The reform momentum must be maintained,” he said, while suggesting that India should take steps to revise the labour laws, handle banks’ stressed assets and ease stringent product regulations,” reported the Indian Express.

OECD’s Gurria further noted that the impact of demonitization would be short-lived and was a positive step in the right direction for the economy in the longer-term.

Best Canadian Dollar Rate Today: 1 GBP = 1.64314

Best Canadian Dollar Rate Today: 1 GBP = 1.64314

Unknown   7:16 AM

The best British Pound to Canadian Dollar exchange rate of the year to date (past 365 days) was 1.9301 achieved on 2016-05-25.

Today's exchange rate is at 1.6431, this is 14.87% off the best exchange rate of the past year-to-date.

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US Dollar Strength: Fed-Speak Reaches a Crescendo Today

US Dollar Strength: Fed-Speak Reaches a Crescendo Today

Unknown   7:14 AM

Exchange rates are likely to take direction ahead of the weekend from the words of US Federal Reserve Chair Janet Yellen who delivers a much-anticipated speech at 18:00 G.M.T.
With the US Dollar having enjoyed a stellar week of trade there is a risk that any disappointments from Yellen with regards to the pace of interest rate rises through the course of 2017 and 2018 will trigger fresh selling pressures.
But its not just Yellen who gets a say today as we have Federal Reserve Bank of Chicago President Charles Evans speaking at 15:15, followed by US Fed board member Jerome Powell at 17:15.
Following Yellen at 18:00 is Vice Chair of the Federal Reserve Stanley Fischer.
“Fed-speak rises to a crescendo today, before the blackout ahead of the March 15 FOMC meeting,” says Adam Cole, Chief Currency Strategist with RBC Capital Markets in London. “The default position is that rates rise on March 15 and the onus is on the data or news-flow stopping that happening.”
The US Federal Reserve are going to raise interest rates in March - at least this is the conclusion reached on market pricing for such an event.
Money markets are assigning a 90% probability of such an event; and when markets are so set on a particular outcome the Fed has little choice but to comply.
"Recent Fed speakers have made the March meeting more than ‘live’, in fact fed funds futures indicate that a March rate hike has become the market’s base case in only a few days, with the implied probability now at 90%. Now we’ll have to wait for Yellen to see if she puts out the fire or joins the chorus," says Philip Marey, Senior US Strategist at Rabobank.
This week, in his first speech to Congress, President Donald Trump did not provide any details on tax cuts or other
policy plans, but struck a conciliatory tone that reassured markets.
However, the focus shifted quickly to monetary policy after NY Fed president Bill Dudley stated that the case for tightening had become “a lot more compelling” as risks to the economic outlook have started tilting to the upside.
These hawkish comments, together with recent statements by other regional Fed presidents, have clearly increased the risk of a move in March.
The net result of these growing expectations is a stronger US Dollar which has outperformed its rivals this week:

• The US Dollar index is at 102.05 having started the week at 101.07
• The Pound to Dollar exchange rate is quoted at 1.2259 having started the week at 1.2554
• The Euro to Dollar exchange rate is quoted at 1.0516 having started the week at 1.0584
• The Australian to US Dollar exchange rate is quoted at 0.7554 having started the week at 0.7712.

If the Fed were to avoid raising interest rates then their credibility would be undermined and the reaction of markets - a hefty sell-off in the US Dollar being likely - would arguably be destabilising.

“While the probability of a March move seems more likely to rise toward 100% than to fall, further upside for USD on rate expectations is probably limited from current levels,” says RBC Capital’s Cole.

We would agree and say that the Dollar is at risk of profit-taking from its recent run and any guidance from Fed members of a slower pace of rate rises beyond March could trigger selling.

"Markets are now well on the way to pricing in the three Fed rate hikes we expect for this year but investors may reasonably start to ponder whether earlier means more in terms of Fed tightening over the balance of the year as the Trump administration continues to ponder its fiscal stimulus plans," says Shaun Osborne, an analyst with Scotiabank.

Why is the Fed Keen on Raising Rates All of a Sudden?

There has been a tangible shift in the Fed’s appetite for introducing higher interest rates between the January/February meeting and this week.

The shift comes without any major change in the economic data, suggests that something else is going on in the FOMC.

What are the possible explanations? Rabobank's Marey offers some explanations on the matter which has a bearing on how today might play out on markets:

1) Perhaps once they realized that it could take longer to get clarity on fiscal policy plans, they decided that fiscal policy is going to provide a stimulus to the economy in any case (basically Dudley’s approach in his CNN interview: if not already incorporated in the baseline forecast, it is at least a risk to the upside), so why not hike now?

2) Or perhaps the FOMC wants to grab the opportunity to hike, now that the economy is on a steady course and euphoria has desensitized the markets to a rate hike. Waiting for the stars to converge has slowed down the Fed in the last two years with only a single rate hike out of the four they promised each year.

3) There is the possibility that this is not a coordinated effort by the Fed. Since the shift took place shortly after Yellen’s speech, we may be witnessing a breakdown in Yellen’s control of the FOMC. Perhaps the FOMC participants are reacting in the same manner that soccer players react when they learn that the term of their coach is coming to an end: they don’t take the coach seriously anymore.

Pound to Dollar Exchange Rate Outlook for Coming Five Days

Pound to Dollar Exchange Rate Outlook for Coming Five Days

Unknown   7:09 AM

GBP/USD lost ground last week as the Dollar rose on the increasing likelihood the Federal Reserve will raise interest rates in March thus stimulating foreign capital inflows.
The Pound meanwhile declined on fresh concerns the Scottish will want a second referendum on independence due to the majority of them not voting for Brexit.
From a technical point of view, the pair is sat at a crossroads.
It is right on a tough level of support provided by a major trendline drawn from the October lows, at 1.2212.
The big question now is whether it will rebound off this trendline or pierce right through it?
Given the previous week’s trend was down and is more likely to continue then arrest there is a marginal bias to a continuation lower.
We would want to see a clear break below the 1.2200 level, however, for confirmation of further downside, to a target at 1.2000, calculated by taking the length of the move before the trendline break (X on the chart below) and extrapolating it below the break (Y).
MACD is poking below the zero-line which is also supporting a more bearish outlook.
The pair is also now below its 50 and 200-day moving averages, a further negative sign.

Data for the Dollar in the Week Ending Mar 10

The main release for the US Dollar will be Non-Farm Payrolls at 13.30 GMT on Friday, March 10.
The consensus expectation is for 190k but investment bank TD Securities actually see this as slightly cautious, expecting a 205k result instead.
An above 200k forecast would send the Dollar higher as it would solidify March rate increase hopes from the Federal Reserve.
TD see the Unemployment rate falling from 4.8% to 4.7% in line with expectations.
The other main theme for the Dollar are rising market expectations the Fed will increase interest rates at their March 15 meeting.
Such a move would boost the Dollar by attracting my foreign capital to the US seeking higher interest returns.

Data for Sterling

Not much top tier data for the Pound in the week ahead, but on Tuesday, March 7 there is the release of tier two data in the form of the Retail Sales Monitor from the British Retail Consortium (BRC).
It is a survey rather than a hard data release but sentiment indicators are still often quite reliable indicators of future activity.
The monitor, out at 00.01 (GMT) is expected to show a 0.2% rise in February from the -0.6% decline in Jan.
Overall recent UK data has been described as soft, and this combined with the resurfacing of fresh Brexit risks relating to calls for a Scottish referendum are have been weighing on Sterling.
Whilst the cost to England of a Scottish break off have not yet been estimated by analysts there is an argument to say they may be roughly balanced with the gains, since Scotland enjoys a disproportionate slice of the budget for its size.
Nevertheless, currently the market is of the opinion that the related uncertainty caused by Scotland is negative for Sterling so more losses may be on the horizon as the narrative unfolds.
“Sterling fell hard this week as data took a turn for the worse. After a month of very narrow trading ranges, sterling finally broke down on the heels of softer data.
Aside from slower service-sector activity, manufacturing activity also eased in February and between the stronger U.S. dollar, Scotland pushing for another referendum vote and Brexit's Article 50 later this month, it was only a matter of time before the bottom underneath sterling fell out. Now that support has been broken, we anticipate further losses in GBP,” commented Managing Director of BK Asset Management, Kathy Lien in a recent note seen by PSL.