GBP/USD – Unsteady After Weak UK Numbers

GBP/USD is fluctuating in Wednesday trading, after the UK posted disappointing numbers. The pair lost ground and slipped below the 1.52 line in the European session, but has recovered nicely and was trading in the high-1.52 range in the North American session. British releases looked weak, as Public Sector Net Borrowing and CBI Industrial Order Expectations were well off their estimates. In the US, Flash Manufacturing was sluggish, while New Home Sales came in slightly above expectations. 

Tuesday’s British releases were awful, and the pound has responded with some sharp fluctuations. Public Sector Net Borrowing posted a debt of 16.7 billion pounds, compared to just 4.4 billion pounds in the previous release. The estimate stood at 14.3 billion pounds. CBI Industrial Order Expectations fared no better, plunging from -15 points to -25 points. This was well below the estimate of -14 points. It was the worst showing by the indicator since October 2010, and points to continued trouble in the manufacturing sector.

In the US, Flash Manufacturing PMI disappointed, falling from 54.9 points to 52.0. This missed the estimate of 53.8 points. There was finally some good news from a key event, as New Home Sales climbed to 417 thousand, edging past the estimate of 416 thousand. The US has posted several weeks of disappointing data in all sectors of the economy, raising questions of the extent of the recovery. The markets will be hoping that this week’s other major releases will be positive.

Back 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 concerns about the UK economy, which could take a toll on the British pound. 

 

GBP/USD for Tuesday, April 23, 2013

Forex Rate Graph 15/1/13

GBP/USD April 23 at 14:45 GMT

1.5276 H: 1.5297 L: 1.5197

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5053 1.5138 1.5203 1.5309 1.5392 1.5475

 

The pound is quite active in Wednesday trading. The currency dropped below 1.52 in the European session, but has recovered strongly. The pair is facing resistance at 1.5309. Given the current fluctuations we are seeing from GBP/USD, this line could be tested. There is stronger resistance at 1.5392. On the downside, there is support at 1.5203. This line was briefly breached earlier, but has strengthened as the pair trades at higher levels. The next support level is at 1.5138.

  • 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 has finally shown some activity, with a strong shift in favor of the long positions. The pound did lose ground earlier, but has recovered most of these losses. Long positions maintain a slight majority in the ratio, indicative of a bias towards the pound continuing to make inroads at the expense of the US dollar.

The pound is holding its own, despite some dismal British releases on Tuesday. However, the markets are not confident about the UK economy, with the recent Fitch downgrade and pessimistic IMF report which lowered its forecast of British GDP.  The pound will likely remain under pressure from the US dollar.

 

GBP/USD Fundamentals

  • 8:30 British Public Sector Net Borrowing. Estimate 14.3B. Actual 16.7B.
  • 10:00 British CBI Industrial Order Expectations. Estimate -14 points. Actual -25 points.
  • 11:00 External BOE MPC Member Ian McCafferty Speaks.
  • 13:00 US Flash Manufacturing PMI. Estimate. 53.8 points. Actual 52.0 points
  • 13:00 US HPI. Estimate 0.7%. Actual 0.7%
  • 14:00 US New Home Sales. Estimate 416K. Actual 417K.
  • 14:00 US Richmond Manufacturing Index. Estimate 3 points. Actual -6 points.

 

*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.