The British pound has steadied after a week of sharp losses at the hands of the US dollar. In North American trade, GBP/USD is trading in the mid-1.51 range. These are the lowest levels we have seen since mid-July. The UK and US posted positive numbers earlier in the day. British Manufacturing PMI posted its best performance in over two years. As expected, the Bank of England did not make any adjustments to the asset purchase facility or interest rate level. Over in the US, Unemployment Claims and ADP Non-Farm Employment Change both looked very sharp.
Anyone expecting dramatic news from the Federal Reserve’s policy statement on Wednesday ended up disappointed. As expected, the Fed said it would continue with the present level of QE, which involves $85 billion in asset purchases each month, and gave no indication about when it might scale down QE. There has been talk that the Fed could taper QE as early as September, and the speculation and uncertainty will likely continue to cause volatility in the markets as long as the Fed doesn’t show its cards. The Fed gave a cautious thumbs-up to current economic activity, noting that the economy was growing at a “modest” pace.
There was good news out of the UK as British Manufacturing PMI posted its fifth consecutive increase, climbing from 52.5 to 54.6 points. This marked the index’s best showing since March 2011. Construction PMI has also been on an upward trend and the July reading will be released on Friday. The markets are hopeful that that the index will keep pace with Manufacturing PMI.
As widely expected, the BOE did not make any moves on Thursday. The central bank kept interest rates pegged at a record low of 0.50% and the bond purchase program remained steady at 375 billion pounds. With the recent change in top management at the BOE, new governor Mark Carney continues to be under a lot of scrutiny. Carney has the respect and attention of the markets, as his tenure at the Bank of Canada was widely judged as a success. Analysts note that Carney practiced forward guidance at the BOC, and is expected to continue his pro-active approach at the BOE.
Over in the US, the economic news continued to look strong on Thursday. The all-important Unemployment Claims sparkled, as the indicator posted its lowest figure since May, at 326 thousand. This was a sharp drop from the previous reading of 343 thousand, and easily surpassed the estimate of 346 thousand. Not to be outdone, ISM Manufacturing PMI climbed from 50.9 to 55.4 points, its best performance since May 2011. These strong releases come on the heels of Advance GDP and ADP Non-Farm Payrolls, which looked very sharp as well. We could see the US dollar post broad gains as a result of these excellent numbers.
GBP/USD for Thursday, August 1, 2013
GBP/USD August 1 at 15:30 GMT
GBP/USD 1.5165 H: 1.5243 L: 1.5132
GBP/USD has settled down in Thursday trading, as the proximate support and resistance levels remain in place (S1 and R1 above). GBP/USD continues to receive support at 1.5111. This is not a strong line and could find itself under pressure if the pair’s downward trend resumes. The next support line is at the critical line of 1.5000. This line has remained intact since early July. On the upside, the pair faces resistance at 1.5203, protecting the 1.52 line. This is followed by resistance at 1.5309.
- Current range: 1.5111 to 1.5203
Further levels in both directions:
- Below: 1.5111, 1.5000, 1.4896 and 1.4781
- Above: 1.5203, 1.5309, 1.5432, 1.5527, 1.5645 and 1.5756
OANDA’s Open Positions Ratio
GBP/USD ratio is almost unchanged in Thursday trade, continuing a trend we have seen all week. This is consistent with what we are seeing from the pair, which has not showed much movement. Short positions make up a majority of the ratio, a sharp contrast to what we saw in early July, when long positions dominated. This is indicative of a slight bias in favor of the pound reversing direction and posting gains against the dollar.
After a miserable week, the pound may have found its footing, as the currency has steadied against the dollar. We can expect GBP/ USD to remain steady for the remainder of the North American session. Friday could see some volatility from the pair, as the UK and US post major releases.
- 8:30 British Manufacturing PMI. Estimate 52.8 points. Actual 54.6 points.
- 11:00 BOE Asset Purchase Facility. Estimate 375B. Actual 375B.
- 11:00 BOE Official Bank Rate. Estimate 375B. Actual 375B.
- 12:30 US Unemployment Claims. Estimate 346K. Actual 326K.
- 13:00 US Final Manufacturing PMI. Estimate 52.1 points. Actual 53.7 points.
- 14:00 US ISM Manufacturing PMI. Estimate 52.1 points. Actual 55.4 points.
- 14:00 US Construction Spending. Estimate 0.4%. Actual -0.6%.
- 14:00 US ISM Manufacturing Prices. Estimate 53.0 points. Actual 49.0 points.
- 14:30 US Natural Gas Storage. Estimate 55B. Actual 59B.
*Key releases are highlighted in bold
*All release times are GMT