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COT NET POSITIONING
BULLISH PERCENTAGE INDEX
GBP/USD, THE CABLE
The GBP/USD (British Pound/U.S. Dollar) is the abbreviation for the British pound and U.S. dollar currency pair. Also called “the cable”, this cross belongs to the group of Majors. The GBP/USD tends to have a negative correlation with the USD/CHF and a positive correlation to the EUR/USD currency pairs. The Sterling is one of the four most liquid currencies in the Forex arena and one of the reasons is the highly developed capital market. While 60% of the volume of foreign exchange are made via London, the Sterling is not the most traded currency. But the good reputation of the monetary policy of Great Britain and a high interest rate for a long time contributed to the popularity of this currency in the financial world.
The GBP/USD reached an all time high of 2.4546 in November 1980 and a record low of 1.042 in February 1985.
GBP/USD POLITICAL FORECAST 2017
The biggest topic that will affect the GBP/USD in 2017 will obe the Brexit, voted in June 2016 in a referendum whereby British citizens voted to exit the European Union. In his article called “Brexit fears ease”, Ian Stewart from Deloitte passes on the information that “two of the UK’s leading economic forecasters concluded that Brexit is unlikely to cause a sharp slowdown in UK growth over the next three years.” He then underlines that “the UK’s most venerable independent economic forecaster, the National Institute of Economic and Social Research (NIESR), forecasts that UK activity will slow only marginally, from 2.0% in 2016 to 1.7% in 2017, with growth then picking up to 1.9% in 2018 and 2.1% in 2019.”
In the USA, Trump administration’s fiscal policy will probably also be watched by GBP/USD traders. In GBPUSD Forecast 2017 Haresh Menghani explains that “the expected fiscal policy announcements by the US president-elect, Donald Trump, after assuming office in January, would prolong the greenback's strong appreciating move and could also contribute towards restricting recovery for cable. Although precise details and impact of the fiscal stimulus measures are still unknown, but if the reflation policies prove to be effective the Federal Reserve might be inclined to opt for a faster rate-tightening cycle.”
MOST INFLUENTIAL ORGANIZATIONS FOR EUR/USD
The Bank of England is probably the organization that impacts the most the GBP/USD. It has a wide range of responsibilities, similar to those of most central banks around the world. It acts as the government's bank and the lender of last resort. It issues currency and, most importantly, it oversees monetary policy. In 2017, as Haresg Menghani wrote, “BoE Governor Mark Carney has already clarified that, if necessary, he would be willing to tolerate an overshoot in inflation, for some period, in order to support the economy. Hence, any signs of economic slowdown might force BoE to announce another interest rate-cut and (or) an extension of its QE program.” The US Central bank, the Federal Reserve of the United States, is also closely related to the pair. Inside that institution, the Board of Governors (also known as the Federal Reserve Board) is carefully observed. The board meets several times per year and announces the interest rates. If rates remain unchanged, attention turns to the tone of the FOMC (Federal Open Market Committee) statement, and whether the tone is hawkish, or dovish over future developments of inflation.
The City of London includes a lot of organizations and institutions that might impact the cable, in particular the London Stock Exchange, the third-largest stock exchange in the world. The LSE allows companies to raise money, increase their profile and obtain a market valuation through a variety of routes, thus following the firms throughout the whole IPO process.
The European Central Bank also has influence on the cable due to the importance of business and trade between the UE and the UK. Any assessment of possible scenarios linked to a macroeconomic decision taken by the ECB has impact on the commercial partners of the Eurozone. The Euro is the second reference currency in the world (after the US Dollar) and any move by its central bank, the ECB, has consequences on the assessment of its partners.
MOST INFLUENTIAL CURRENCIES FOR GBP/USD
Other currencies relates to the GBP/USD pair and can have influence on it as well, in particular the USD, EUR,CAD and YEN.