GBP/USD – Little Movement as UK Inflation Figures Within Expectations

 GBP is not showing a lot of movement, but has managed to cross the 1.53 line in Tuesday’s European session. In economic news, British CPI matched the forecast, and most of the other inflation data was within market expectations. On Wednesday, the UK releases key employment numbers. In the US, key data continues to disappoint, as Building Permits and Core CPI both missed their estimates. There was some good news from Housing Starts, which beat the forecast.

What is wrong with the US? The country has produced several weeks of poor releases, and there was no relief from today’s key events. After strong employment numbers on Thursday, there was hope that the US would rebound, but the wheels fell off the cart on Friday. Core Retail Sales and Retail Sales both declined by 0.4%. PPI dropped 0.6%, and UoM Consumer Sentiment came in at 72.3 points, way off the estimate of 79.1 points. On Tuesday, Building Permits fell to 0.90 million, missing the estimate of 0.94 million. Core CPI posted a weak gain of 0.1%, lower than the estimate of 0.2%. There was some good news as Housing Starts surprised with its best performance since 2008. There were 1.04 million new starts, blowing past the estimate of 0.93 million. The alarm bells may not have gone off just yet, but the continuing weak numbers are raising concerns about the extent of the US recovery.

The Cyprus bailout agreement has been signed, but is the crisis really over? Eurogroup finance ministers met last Friday and approved a EUR 10 billion loan to Cyprus. Under the agreement, Cyprus will have to kick in EUR13 billion. Back in March, Cyprus was only supposed to add another EUR 7 billion. However, the deal collapsed after Cyprus balked at taxing every bank deposit in the country following a huge outcry on the island. Cyprus president Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Depositors in the Bank of Cyprus will lose between 37.5% and 60%, while depositors in Laiki Bank could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Even with the bailout, the economy is in for a rough time. Analysts estimate that the country’s GDP will shrink by 13% in 2013 and 2014.

In Italy, not much has happened since the inconclusive election back in February. Coalition negotiations between the parties have gone nowhere. Mario Monti remains head of a caretaker government, which is little more than a lame duck, unable to continue with economic reforms. Monti and center-left leader Pier Luigi Bersani are close to an agreement to choose a successor to President Giorgio Napolitano, who will step down in mid-May. The crisis in the Eurozone’s third largest economy threatens to undermine the Eurozone, and the markets are hoping that the choosing of a new president will be the first step in the formation of a new government.

 

GBP/USD for Tuesday, April 16, 2013

Forex Rate Graph 15/1/13

GBP/USD April 16 at 12:50 GMT

1.5316 H: 1.5330 L: 1.5274

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5138 1.5203 1.5309 1.5392 1.5475 1.5524

 

GBP/USD is trading slightly above the 1.53 line in Tuesday trading. The proximate resistance and support levels remain intact (R1 and S1 above). On the downside, there is weak support at 1.5309. This line could be breached if the dollar shows any improvement. There is a stronger support level at 1.5203, protecting the 1.52 line. On the upside, the pair faces resistance at 1.5392. This is followed by resistance at 1.5475, a line which has remained intact since mid-February. 

  • Current range: 1.5309 to 1.5392

 

Further levels in both directions:

  • Below: 1.5309, 1.5203, 1.5138, 1.5053 and 1.4988
  • Above: 1.5392, 1.5475, 1.5524 and 1.5630

 

OANDA’s Open Positions Ratios

The GBP/USD ratio is not showing much activity in Tuesday trading. This is reflected in the current movement of the pair, which has not been able to sustain much momentum in either direction. Traders should continue to monitor the ratio, as an increase in movement could be an early indication of activity by GBP/USD.

The pound is struggling to stay above the 1.53 line, and today’s UK data did not have much impact on the pair, as it was generally within expectations. Today’s weak US numbers could affect the movement of GBP/USD, so we could see some volatility from the pair in the North American session. 

 

GBP/USD Fundamentals

  • 8:30 British CPI. Estimate 2.8%. Actual 2.8%.
  • 8:30 British PPI Input. Estimate -0.3%. Actual -0.1%.
  • 8:30 British RPI. Estimate 3.3%. Actual 3.3%.
  • 8:30 British Core CPI. Estimate 2.3%. Actual 2.4%.
  • 8:30 British HPI. Estimate -2.8%. Actual 1.9%.
  • 8:30 British PPI Output. Estimate 0.3%. Actual 0.3%.
  • 12:00 US FOMC Member William Dudley Speaks
  • 12:30 US Building Permits. Estimate 0.94M. Actual 0.90M.
  • 12:30 US Core CPI. Estimate 0.2%. Actual 0.1%.
  • 12:30 US CPI. Estimate 0.0%. Actual -0.2%.
  • 12:30 US Housing Starts. Estimate 0.93M. Actual 1.04M.
  • 13:15 US Capacity Utilization Rate. Estimate 78.4%
  • 13:15 US Industrial Production. Estimate 0.3%
  • 14:00 US Treasury Secretary Jack Lew Speaks
  • 16:00 US FOMC Member Elizabeth Duke Speaks
  • 19:00 US FOMC Member Janet Yellen 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.

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.