GBP/USD – Steady After Weak US Employment Data

GBP/USD is not showing much movement, although the pound managed to cross above the 1.58 line in Thursday trading. In the US, there were some weak releases. After a very poor GDP reading, there was more bad news, as Unemployment Claims were a major disappointment. The US Federal Reserve wrapped up its policy meeting, and said that QE3 would continue. In the UK, Consumer Confidence remains weak, while housing inflation data showed some improvement.

Recent key releases show that the US economy continues to hit bumps along the road. The markets got a jolt from an abysmal GDP reading, as the US economy declined by 0.1% in Q4. Although a very modest loss, there is bound to be negative market reaction, as this was the first decline since 2009, and the markets had anticipated a 1.1% gain. There was some positive employment news, as the ADP Non-Farm Employment Change came in at 192 thousand new jobs, well above the estimate of 164 thousand. However, Unemployment Claims was a major disappointment. For the first time in four weeks, the number of new claims rose, reaching 368 thousand. This was higher than the market forecast, which stood at 362 thousand. Friday sees the release of additional employment data, Non-Farm Payrolls and the Unemployment Rate. If these releases are not to the market’s liking, we could some movement from GBP/USD. Back in the UK, GfK Consumer Confidence remains in mired in the deep freeze, as the indicator posted a reading of -26 points. The estimate stood at -27 points. For the UK economy to recover, it is critical that consumers gain confidence and feel comfortable making purchases. Thursday’s other British release, Nationwide HPI, improved nicely to 0.5%, beating the forecast of 0.3%.

The markets were carefully monitoring this week’s Federal Reserve meeting, but there were no surprise developments as the powerful US central bank wrapped up a two-day policy meeting. Analysts were looking for clues as to an end date for the current Quantitative Easing program (QE3), but no such hints were forthcoming. The Fed stated it would continue its open-ended QE3 program until the outlook for the labor market “improves substantially”. This put to rest any doubts that the current round of QE, under which the Fed is purchasing $85 billion a month in securities, will be terminated anytime soon. At the same time, the Federal Reserve took note of increased job hirings, stronger consumer and business spending, and some improvement in the US housing sector. The Fed also maintained its ultra-low benchmark interest rate, saying there would be no change until unemployment drops below 6.5%. With US unemployment close to 8%, we will likely be hearing this refrain for the foreseeable future.

 

GBP/USD for Thursday, Jan 31, 2013

Forex Rate Graph Thursday, January 31, 2013

GBP/USD January 31 at 15:40 GMT

1.5822 H: 1.5842 L: 1.5776

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5685 1.5728 1.5785 1.5850 1.5919 1.5975

 

The pound has edged higher against the US dollar, and pushed across the 1.58 line earlier. GBP is receiving support at 1.5785. There is stronger support at 1.5728. On the upside, there is resistance at 1.5850. This line is not strong, and could face pressure if the pound gains more ground. This is followed by strong resistance at 1.5919.

Current range: 1.5785 to 1.5850.

Further levels in both directions:

  • Below: 1.5785, 1.5728, 1.5685, 1.5625, 1.5568, 1.5481 and 1.5395.
  • Above: 1.5850, 1.5919, 1.5975, 1.6062 and 1.6135.

 

OANDA Open Positions Ratios

The GBP/USD ratio continues to move towards long postions. This has been reflected in the currency pair, which has made slow but steady gains against the US dollar. Long positions command a solid majority in the ratio, indicating that trader sentiment continues to be biased towards the pound continuing to make headway against the dollar.

The pound continues to post gains against the dollar, although the rally has been modest in scope. Will the pound continue to push higher? Key US employment data will be released on Friday, and the market mood could be reflected in the GBP/USD. We can expect some volatility if the readings are not in line with market expectations.

 

GBP/USD Fundamentals

  • British GfK Consumer Confidence. Estimate -26 points. Actual -27 points.
  • British Nationwide HPI. Estimate 0.3%. Actual 0.5%.
  • 12:30 US Challenger Job Cuts. Actual -24.4%.
  • 13:30 US Unemployment Claims. Estimate 362K. Actual 368K.
  • 13:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.0%.
  • 13:30 US Employment Cost Index. Estimate 0.6%. Actual 0.5%.
  • 13:30 US Personal Spending. Estimate 0.4%. Actual 0.2%.
  • 13:30 US Personal Income. Estimate 0.7%. Actual 2.6%.
  • 14:45 US Chicago PMI. Estimate 51.1 points. Actual 55.6 points.
  • 15:30 US Natural Gas Storage. Estimate -202B. Actual -194B.

 

*Key releases are highlighted in bold

*All release times are GMT

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.