GBP/USD picked up where it ended last week, and continues to trade in the mid-1.52 range. The week ended on a sour note, as the Fitch Credit Agency downgraded the UK. Monday’s only data is US Existing Home Sales. The key indicator disappointed, falling well below the estimate. The only British releases is a speech by BOE Deputy Governor Paul Tucker, who will address an economic forum in New York.
What’s wrong with the US economy? Economic data has looked weak, as almost all key releases have been below their estimates since late March. Last Thursday saw more key releases and more bad news, as employment and manufacturing numbers disappointed. Unemployment Claims came in at 352 thousand, higher than the estimate of 349 thousand. The Philly Fed Manufacturing Index dropped from 2.0 points to 1.3 points, nowhere near the estimate of 2.7 points. This week started off on the wrong foot, as US Existing Home Sales dropped from 4.98 million to 4.92 million. This was well below the estimate of 5.02 million. Further weak numbers will likely raise red flags about the health of the US economy and the extent of the recovery.
In the UK, there was bad news for the government as the Fitch credit ratings agency downgraded UK debt from AAA to AA+, citing a weaker economic and fiscal outlook for the British economy. Fitch did return its outlook to “stable”, which means that it will not make further downgrades in the near future. The move follows an IMF report last week which downgraded its forecast for UK growth this year. The IMF lowered its forecast from 1% in January to 0.7%. These developments underscore growing concern about the UK economy, which could weigh on the British pound.
The G20 wrapped up its meeting of finance ministers and central bankers in Washington. There is certainly concern about the plunging yen, but the G20 did not take reprimand Japan over its monetary easing policies. Although Japan has faced a lot of criticism leveled against Japan, the G20 issued a very soft statement about monetary easing which didn’t even mention Japan. This clears the way for the Bank of Japan to continue its aggressive easing policy. The yen responded by dropping to four-year lows, as the elusive 100 level is almost within reach.
GBP/USD for Monday, April 22, 2013
GBP/USD April 22 at 14:30 GMT
1.5250 H: 1.5257 L: 1.5205
The pound is trading in the mid-1.52 range early in the North American session. There is resistance at 1.5309. This is followed by a resistance line at 1.5392. On the downside, 1.5203 is providing support. The next support level is at 1.5138,which has held firm since early April.
- Current range: 1.5203 to 1.5309
Further levels in both directions:
- Below: 1.5203, 1.5138, 1.5053 and 1.4988
- Above: 1.5309, 1.5392, 1.5475, 1.5524 and 1.5630
OANDA’s Open Positions Ratios
The GBP/USD ratio is not showing much movement as we start the new trading week. This is reflected in what we are seeing from the pair, which is fairly quiet. The majority of positions are now long, indicating an expectation that GBP/USD will push higher.
The pound is steady, despite the Fitch downgrade on Friday. However, Fitch’s action comes on the heels of an IMF report which lowered its forecast of British GDP, so clearly there is unease in the markets about the prospects of the UK economy. The pound will likely remain under pressure from the US dollar, and weak numbers out of the UK could push the British currency lower.
- 12:30 US FOMC Member William Dudley Speaks
- 14:00 US Existing Home Sales. Exp. 5.02M. Actual 4.92M
- 18:30 BOE Deputy Governor Paul Tucker Speaks
*Key releases are highlighted in bold
*All release times are GMT
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