GBP/USD – Dollar Gets Boost After Excellent US Numbers

GBP/USD has lost ground in Tuesday trading. In the North American session, the pair is trading at the 1.54 level. The dollar gained ground thanks to some very strong US numbers earlier in the day, as all three key releases beat their estimates. The UK also posted some positive numbers on Tuesday. 

US releases charged out of the gates on Tuesday with impressive numbers. Core Durable Goods rose 0.7%, easily surpassing the estimate of 0.0%. CB Consumer Confidence shot up to a multi-year high, at 81.4 points. The estimate stood at 75.2 points. New Home Sales came in at 476 thousand, well above the estimate of 462 thousand. Manufacturing data, often a sore spot, also looked sharp as the Richmond Manufacturing Index shot up to 8 points, way above the estimate of 0 points.

There was good news out of the UK as well on Tuesday. BBA Mortgage Approvals hit a 16-month high, climbing to 36.1 thousand. The estimate stood at 33.1 thousand. CBI Realized Sales, an important consumer spending indicator, bounced back from last month’s dismal reading of -11 points, and climbed back into positive territory. The indicator posted a reading of 1 point, matching the forecast. Outgoing BOE Governor Mervyn King and other policymakers testified before parliament, at the Inflation Report Hearings.

The Eurozone is the UK’s largest trade partner, so developments in the Eurozone, both good and bad, can have a major impact on the UK and the British pound. The Eurozone economy continues to sputter, and there are serious concerns about the health of the German economy. Long considered the locomotive of Europe, the largest economy in the Eurozone continues to churn out weak data. Last week, German Manufacturing PMI remained under the 50-point level, indicating contraction in the manufacturing sector. German PPI also disappointed, posting a decline of -0.3%. On Tuesday, German Ifo Business Climate, a key indicator, came in at 105.9 points, just short of the estimate of 106.0. These numbers point to weakness in the German economy, and if Germany does not lead the way to recovery, the Eurozone will have a very tough time pulling out of the current recession.

Greece has not been in the news recently, as the bailout program has been progressing according to schedule. However, the dark clouds of political instability have returned, as the smallest party in the governing coalition, the Democratic Left,, quit the government on Friday. The reason was the government’s decision to close the state broadcaster as part of its plan to eliminate 15,000 public sector jobs by 2014, as mandated by the bailout agreement. The loss of the Democratic Left leaves the coalition with a razor-thin majority in parliament of just three seats. The timing of this crisis is particularly unfortunate, as Greece is due to receive another installment of bailout funds in July. The troika (European Commission, ECB and IMF) are playing down the crisis, saying that the bailout will proceed on schedule. If this optimism proves to be unfounded, we could see the euro run into some turbulence.

 

GBP/USD for Tuesday, June 25, 2013

Forex Rate Graph 15/1/13

GBP/USD June 25 at 15:15 GMT

GBP/USD 1.5408 H: 1.5478 L: 1.5397

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5111 1.5203 1.5309 1.5432 1.5557 1.5700

 

GBP/USD has lost ground and is trading slightly above the 1.54 line in Tuesday trading. The pair continues to receive strong support at 1.5309, protecting the 1.53 level. On the upside, there is resistance at 1.5432. This is a weak line was tested earlier in the day, and could face pressure if the pound recovers. This is followed by strong resistance at 1.5557.

  • Current range: 1.5309 to 1.5432

 

Further levels in both directions:

  • Below: 1.5309, 1.5203, 1.5111 and 1.5000
  • Above: 1.5432, 1.5557, 1.5700, 1.5800, and 1.5869

 

OANDA’s Open Positions Ratio

GBP/USD ratio is back in action after a lull on Monday. There is movement towards short positions, which is reflected in the pair, as the dollar has posted gains against the pound. Short positions continue to retain a solid majority, indicating a strong bias towards the GBP/USD moving in a downward direction.

The dollar got a boost from strong US releases on Tuesday, and has pushed higher against the pound. The BOE will be under the market microscope on Wednesday, as the central bank releases its Financial Stability Report and Governor King holds a press conference. We could see some volatility from GBP/USD, depending on the market reaction to these releases.

 

GBP/USD Fundamentals

  • 8:30 British Inflation Report Hearings.
  • 8:30 British BBA Mortgage Approvals. Estimate 36.1 thousand. Actual 33.1 thousand.
  • 8:30 British CBI Realized Sales. Estimate 1 point. Actual 1 point. 
  • 12:30 US Core Durable Goods Orders. Estimate 0.0%. Actual 0.7%.
  • 12:30 US Durable Goods Orders. Estimate 3.0%. Actual 3.7%.
  • 13:00 US S&P/CS Composite-20 HPI. Estimate 10.6%. Actual 12.1%.
  • 13:00 US HPI. Estimate 1.2%. Actual 0.7%.
  • 13:59 US Richmond Manufacturing Index. Estimate 8 points. Actual 0 points.
  • 14:00 US CB Consumer Confidence. Estimate 75.2 points. Actual 81.4 points.
  • 14:00 US New Home Sales. Estimate 462K. Actual  476 points.
  • 21:00 US Treasury Secretary Jack Lew 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.