GBP/USD – Pound Firmer After Strong British GDP

The British pound continues to trade in the mid-154 range, after getting a big lift from the British GDP release on Thursday. The key indicator made an impressive jump from -0.3% to 0.3%, beating the estimate of 0.1%. The markets were pleased with the results, and GBP/USD climbed around 160 points, hitting its highest levels since February. In the US, there was some good news from Unemployment Claims, which bounced back and came in well below the estimate. Friday’s key event is US Advanced GDP. The markets will also be keeping an eye on the UoM Consumer Sentiment. There are no releases from the UK.  

Could we see a rate cut from the ECB next week? The Eurozone continues to stagnate with poor releases, and has its hands full with crises in Cyprus (bailout fiasco) and Italy (political gridlock). Speculation that the ECB will take action is growing in the markets. Goldman Sachs released a statement on Thursday, stating that it expects a 0.25% cut when the ECB meets next week. The prestigious firm also downgraded Eurozone growth for 2013, from -0.5% to -0.7%. The ECB will set rates next Thursday, but the possibility of a rate cut will likely to preoccupy the markets during the course of the week. 

In Italy, there have been some positive developments, and the country finally seems closer to forming a government after months of bickering by the parties. Lawmakers couldn’t agree on a new president, and in a surprise move, Giorgio Napolitano, who was scheduled to leave the post, was reelected. Earlier this week, Enrico Letta was named as prime minister. Letta’s Democratic Party does not have a parliamentary majority, so we can expect difficult coalition talks.  He is expected to try and form an alliance with former PM Silvio Berlusconi. Once a new government is formed, it will be faced with an economy mired in recession and an electorate that is unhappy with tough austerity measures.

The US has been having its share of problems as well. Since late March, almost all key releases have pointed  downwards, indicating weakness in a wide range of economic sectors. On Wednesday, Core Durable Goods, a key manufacturing event, declined by 1.4%, well below the estimate of a 0.5% gain. There was better news on Thursday, as Unemployment Claims dropped to 339 thousand, beating the estimate of 352 thousand. However, the markets remain concerned about the pace and  extent of the US recovery, and will want to see additional releases pointing upwards.  

 

GBP/USD for Friday, April 26, 2013

 Forex Rate Graph 15/1/13

GBP/USD April 26 at 10:35 GMT

1.5450 H: 1.5472 L: 1.5419  

 

 GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5203 1.5309 1.5392 1.5475 1.5524 1.5630

The pound has settled down after posting sharp gains on Thursday. The pair is facing resistance at 1.5475. Given the strong upward momentum we are seeing from the pair, this line could face pressure. There is a stronger resistance line at 1.5524. On the downside, 1.5392 is providing support. The next support line is 1.5309. This line has strengthened as the pair trades at higher levels.

  • Current range: 1.5392 to 1.5475

 

  Further levels in both directions:

  • Below: 1.5392, 1.5309, 1.5203 and 1.5138
  • Above: 1.5475, 1.5524, 1.5630 and 1.5695

 

  OANDA’s Open Positions Ratios

The GBP/USD ratio is unchanged, after strong movement on Thursday. This is reflected in the current lack of movement exhibited by the pair. The ratio is now almost evenly split between long and short positions, indicating that trader sentiment is split as to which direction the pair will move next.

GBP/USD has looked rather dull this week, but that was certainly not the case on Thursday, as the pound shot up against the US dollar, barreling past the 1.54 line. The pair has settled down on Friday, but we could see some movement, as the US releases a key event later today, Advanced GDP. Look for the pair to react if the reading is not in line with market expectations.  

 

GBP/USD Fundamentals

  • 12:30 US Advance GDP. Estimate 3.1%.
  • 12:30 US Advance GDP Price Index. Estimate 1.3%.
  • 13:55 US Revised UoM Consumer Sentiment. Estimate 73.3 points.
  • 13:55 US Revised UoM Inflation Expectations.

 

*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.