GBP/USD – Pound Dives As Net Lending Drops

The British pound has taken a tumble on Tuesday, as GBP/USD has lost about one cent on the day. The pair is trading in the mid-1.60 range in the North American session. In ecnomic news, British Net Lending to Individuals was a major disappointment, as the indicator was way off expectations. It was another rough day for US releases, as PPI, Retail Sales and CB Consumer Confidence all missed their estimates. Core Retail Sales was the lone bright spot, as it matched the forecast. As well, the Federal Reserve meets for a two-day policy meeting which begins on Tuesday.

In the US, the grim readings continued on Tuesday. PPI and Retail Sales both declined by 0.1%, missing the estimate of 0.2%. CB Consumer Confidence dropped sharply, from 79.7 to 71.2 points, a six-month low. This was well short of the estimate of 75.7 points. Core Retail Sales managed to match the forecast, rising to 0.4%. The mostly weak figures come on the heels of dismal housing numbers on Monday. If confidence in the US economy starts to weaken, we could see the dollar, which is already under pressure from the major currencies, lose ground.

The pound failed to take advantage of the weak US releases, and had trouble of its on the home front, as Net Lending to Individuals dropped to 1.6 billion pounds in September, well off the estimate of 2.5 billion. There was better news from Mortgage Approvals, which rose to 67 thousand, beating the estimate of 65 thousand.

The markets are carefully monitoring the FOMC policy meeting, which began on Tuesday. Federal Reserve policymakers have indicated that the Fed is unlikely to taper QE in 2013, and weak US releases will only reinforce this sentiment, and tapering could be on hold to March or April of next year. As tapering is bullish for the dollar, lack of action by the Fed will continue to weigh on the struggling dollar.

GBP/USD for Tuesday, October 29, 2013

GBP/USD October 29 at 15:30 GMT

GBP/USD 1.6039 H: 1.6144 L: 1.6032

GBP/USD Technical

• GBP/USD has posted sharp losses on Tuesday. The pair hit a low of 1.6032 in the North American session, and the pound remains under pressure.
• GBP/USD is facing resistance at 1.6125. This line has some breathing room as the pair trades at lower levels. This is followed by resistance at 1.6125.
• On the downside, there is support at the round number of 1.6000. This line could face pressure if the pound continues to lose ground. Next, there is strong support at 1.5877.
• Current range: 1.600 to 1.6125.

Further levels in both directions:

• Below: 1.6000, 1.5877, 1.5756 and 1.5645
• Above: 1.6125, 1.6231, 1.6300, 1.6421 and 1.6512

OANDA’s Open Positions Ratio

GBP/USD continues to point to movement towards short positions on Tuesday. This is consistent with the movement of the pair, as the dollar has posted sharp gains against the pound. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar continuing to move to higher levels.

The pound is down sharply on Tuesday, as it trades in the mid-1.60 range. The key 1.60 line is within striking distance as the dollar continues to put pressure on the pound.

GBP/USD Fundamentals

• 9:30 British Net Lending to Individuals. Estimate 2.5B. Actual 1.4B.
• 9:30 British M4 Money Supply. Estimate 0.6%. Actual 0.6%.
• 9:30 British Mortgage Approvals. Estimate 65K. Actual 67K.
• 12:30 US Core Retail Sales. Exp. 0.4%. Actual 0.4%.
• 12:30 US PPI. Exp. 0.2%. Actual -0.1%.
• 12:30 US Retail Sales. Exp. 0.2%. Actual -0.1%.
• 12:30 US Core PPI. Exp. 0.1%. Actual 0.1%.
• 13:00 US S&P/CS Composite-20 HPI. Exp. 12.4%. Actual 12.8%.
• 14:00 US CB Consumer Confidence. Exp. 75.2 points. Actual 71.2 points.
• 14:00 US Business Inventories. Exp. 0.3%. Actual 0.3%.

*Key releases are highlighted in bold

*All release times are GMT

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