GBP/USD – Steady After Tepid US Numbers

The British pound is steady in Wednesday trading. GBP/USD did not react to a host of key US releases earlier, as the pair trades quietly in the mid-1.61 range. The pound has looked sharp, gaining over 250 points against the US dollar in less than a week. Later today, we’ll get a look at the minutes of the Federal Reserve’s most recent policy meeting. Over in the UK, there were no surprises from the MPC minutes, which indicated that the interest rate and QE decisions were made unanimously.

After a quiet start to the week for US releases, there was plenty of activity on Wednesday, with four key events. Core Retail Sales posted a weak gain of 0.2%, compared to 0.4% in the previous release. However, this was good enough to beat the estimate of 0.1%. Retail Sales looked stronger, posting a gain of 0.4%, bouncing back from last month’s reading of -0.1%. Core CPI came in at 0.1%, matching the forecast. This is the third straight month that Core CPI has posted this weak gain, so clearly low inflation remains a concern. To underscore this point, CPI dropped 0.1%, its first decline since May. Elsewhere, Existing Homes slipped to a four-month low, at 5.12 million new units. The estimate stood at 5.17 million.

Later on Wednesday, the Federal Reserve will release the minutes of its most recent policy meeting. This event is a market-mover and analysts will be paying close attention to the minutes, especially regarding QE. The markets are expecting the Fed to hold off from tapering in December, as US numbers are still not as strong as the Fed would like. Market sentiment is leaning towards the Fed sticking to its present monetary policy, and any surprises in the minutes would likely shake up the currency markets.

As expected, the BOE’s Monetary Policy Committee voted unanimously (9-0) to maintain the current interest rate of 0.50% and QE at 375 billion pounds. However, the MPC tossed a monkey wrench when it stated that the record-low interest rate might be required even after unemployment rate falls below the 7% level. Previous statements by Governor Mark Carney implied that interest rates could be raised when unemployment dropped below this level, and improving employment numbers have raised speculation that we could see interest rate hikes as early as 2015. The BOE appears to be dampening markets expectations of a rate increase, given the slack in the economy.

Speaking on Tuesday, Fed Reserve Chair Bernard Bernanke said that the Fed remained committed to the current accommodative monetary policy, which stands at $85 billion in asset purchases every month. Bernanke state that the Fed would not taper QE before it was sure that the employment picture continued to improve. Similar sentiments were expressed by Janet Yellen last week when she testified before a senate committee. Yellen is expected to take over as the new head of the Federal Reserve in January.

 

GBP/USD for Wednesday, November 20, 2013

Forex Rate Graph 21/1/13

GBP/USD November 20 at 17:50 GMT

GBP/USD 1.6153 H: 1.6178 L: 1.6103

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5877 1.6000 1.6125 1.6231 1.6300 1.6476

 

  • GBP/USD is steady on Wednesday. The pair touched a high of 1.6178 earlier in North American trading.
  • 1.6125 has reverted to a support role. This is not a strong line and could face pressure if the dollar shows any improvement. This is followed by support at the key level of 1.6000.
  • On the upside, 1.6231 is providing resistance. Next is the round number of 1.6300. This line was last tested in December 2012.
  • Current range: 1.6125 to 1.6231.

 

Further levels in both directions:

  • Below: 1.6125, 1.6000, 1.5877, 1.5756 and 1.5645
  • Above: 1.6231, 1.6300 and 1.6476

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Wednesday trading. This is reflected in the current movement of the pair, as the pound has edged higher. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar reversing direction and moving to higher ground.

The pair has had a quiet day, shrugging off a host of key US releases. We could see some volatility from the pair as the markets wait for the release of the Federal Reserve policy meeting minutes later in the day.

 

GBP/USD Fundamentals

  • 00:00 US Federal Reserve Chairman Bernard Bernanke Speaks.
  • 9:30 Bank of England MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9.
  • 9:30 Bank of England Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9.
  • 10:20 Bank of England Chief Economist Spencer Dale Speaks.
  • 13:30 US Core CPI. Estimate 0.1%. Actual 0.1%.
  • 13:30 US Core Retail Sales. Estimate 0.1%. Actual 0.2%.
  • 13:30 US Retail Sales. Estimate 0.1%. Actual 0.4%.
  • 13:30 US CPI. Estimate 0.0%. Actual -0.1%.
  • 15:00 US Existing Home Sales. Estimate 5.17M. Actual 5.12M.
  • 15:00 US Business Inventories. Estimate 0.3%. Actual 0.6%.
  • 15:00 FOMC Member William Dudley Speaks.
  • 15:30 US Crude Oil Inventories. Estimate -0.2M. Actual 0.4M.
  • 17:10 FOMC Member James Bullard Speaks.
  • 19:00 US FOMC Meeting Minutes.

 

*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.