GBP/USD continues to trade in the high-151 range in Thursday trading. The pound touched above 1.52, but was unable to sustain any upward momentum. The US released mixed data on Thursday, as Preliminary GDP was sluggish, but Unemployment Claims looked very sharp. In the UK, GfK Consumer Confidence was within market expectations.
After a week of mostly positive news from US releases, there was disappointment in the air as Preliminary GDP for Q4, a major economic indicator, posted a lackluster gain of just 0.1%. This was well below the estimate of 0.5%, and paled in comparison to the robust gain in Q3 of 2.7%. This dismal reading, the weakest since 2009, is bound to raise red flags in the markets with regard to the health of the US economy. There was good news as well, as Unemployment Claims bounced back from a weak release last week, and dropped to 344 thousand. This easily beat the forecast of 361K. Chicago PMI looked sharp, rising to 56.8 points. The forecast stood at 54.6. In the UK, the sole release on Thursday was GfK Consumer Confidence. The indicator has been in an extended deep freeze, and the reading of -26 points was exactly what the markets had forecast.
In Washington, Federal Reserve head Bernard Bernanke was busy testifying before the Senate and the House of Representatives. Bernanke sought to reassure the markets that the Fed was intent on continuing the current round of QE. Bernanke dismissed fears that the Fed’s current monetary policy could result in higher inflation or lead to a stock market bubble. There had been some speculation after the release of minutes from the most recent policy meeting, that the Fed was contemplating an end to QE, but Bernanke stated that Fed plans to continue QE and the current policy of ultra-low interest rates for the near future.
As the shockwaves from the Italian elections start to recede, the markets have settled down but remain jittery. Even by Italian standards, the election was a shocker, with no clear party emerging as a clear winner. The 5-Star Movement, which was largely a protest movement that was dubbed a “non-party”, shocked pundits by winning the most votes of any party. The Center-left bloc, headed by Pier Luigi Bersani, will have a majority in the lower house of parliament, but there is a near-split in the Senate. This leaves the country in a political deadlock, as any coalition must have a majority in both houses. Outgoing Prime Minister Mario Monti’s centrist bloc fared poorly at the polls, reflecting widespread voter dissatisfaction with Monti’s tough austerity measures. The political deadlock has rattled markets in Europe and beyond, and the stalemate could result in Italians going back to the polls.
GBP/USD for Thursday, Feb 28, 2013
GBP/USD Feb 28 at 15:40 GMT
1.5165 H: 1.5222 L: 1.5152
The pound has not been able to sustain much movement in Thursday trading and the proximate support and resistance lines remain in place (S1 and R1 above). The pair continues to receive support at 1.5138. This is a weak line, and could see activity if the pound loses any ground. There is stronger support at 1.5053. This line, which is protecting the 1.50 level, has held firm since July 2010. On the upside, 1.5203 is the next line of resistance. There is stronger resistance at 1.5309.
- Current range: 1.5138 to 1.5203
Further levels in both directions:
- Below: 1.5138, 1.5053, 1.4988, 1.4880 and 1.4818
- Above: 1.5203, 1.5309, 1.5395, 1.5481 and 1.5565
OANDA’s Open Positions Ratios
After pointing to strong movement on Wednesday, GBP/USD ratio has gone quiet in Thursday trading. This is consistent with what we are seeing from the currency pair, which has not been able to muster any momentum. Trader sentiment remains strongly biased towards long positions, indicating an expectation for the pound to push upwards against the US dollar.
February will be a month that the pound tries to forget, with GBP dropping a staggering seven cents. The British currency appears to have leveled off from this steep slide, at least for now. British economic data continues to disappoint, and the government’s admission that it will not meet its fiscal targets is akin to pouring oil on the fire. With the US posting mostly positive numbers this week, we can expect the pound to remain under pressure from the greenback.
- 00:01 British GfK Consumer Confidence. Estimate -26 points. Actual -26 points.
- 13:30 US Preliminary GDP. Estimate 0.5%. Actual 0.1%
- 13:30 US Unemployment Claims. Estimate 361K. Actual 344K
- 13:30 US Preliminary GDP Price Index. Estimate 0.6%. Actual 0.9%
- 14:45 US Chicago PMI. Estimate 54.6 points. Actual 56.8
- 15:30 US Natural Gas Storage. Estimate -165B. Actual -171B
- 17:30 US FOMC Member Sarah Bloom Raskin Speaks
*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.