GBP/USD – Lower After Mixed US Numbers

The British pound continues to lose ground in Thursday trading, as GBP/USD trades in the mid-1.63 range in the North American session. In economic news, the action was centered in the US, with the release of three key indicators earlier in the day. Unemployment Claims jumped to a nine-week high, while Retail Sales and Core Retail Sales both improved in November. There was just one British release, as CB Leading Index posted a gain of 0.4%.

US unemployment numbers have looked sharp in recent releases, so Thursday’s poor Unemployment Claims came as a rude surprise to the markets. The key employment indicator jumped to 368 thousand, up sharply from 298 thousand in the previous release. This was well above the estimate of 321 thousand. The weak reading may put on a damper on the Federal Reserve taking action at its December policy meeting. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper would likely boost the US dollar against the major currencies. There was better news from US retail sales data. Retail Sales rose to 0.7%, up from 0.4% in October. Core Retail Sales followed suit, climbing from 0.2% to 0.4%. Both releases beat their estimates.

With memories of the October government shutdown still fresh on Capitol Hill, negotiators have reached a budget agreement which is expected to get the approval of both Republicans and Democrats. The agreement removes the risk of a government shutdown in January and reduces the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the fiscal uncertainty which we’ve seen in recent months.

Over in the UK, recent solid releases point to an economy that continues to pick up steam. This was underscored by a strong reading from NIESR GDP earlier this week. This monthly indicator helps analysts track GDP, which is only released each quarter. The indicator posted gain of 0.8% in November, slightly up from the previous release of 0.7%. If British releases continue to point upwards, speculation will likely increase that the Bank of England may raise interest rates. BOE head Mark Carney has tried to dampen such sentiment, insisting that there is still plenty of slack in the economy and that the Bank has no plans to raise rates in the near future.

GBP/USD for Thursday, December 12, 2013

GBP/USD December 12 at 16:20 GMT

GBP/USD 1.6327 H: 1.6418 L: 1.6323

GBP/USD Technical

• GBP/USD has posted losses on Thursday. The pound dropped below the 1.64 line late in the European session and continues to lose ground in North American trading.
• The round number of 1.6300 continues to provide support. This line has been weakening and could break if the pair’s downward slide continues. This is followed by a support level at 1.6231.
• On the upside, the pair faces resistance at 1.6476.. This is followed by resistance at the round number of 1.6600, which has remained intact since August 2011.
• Current range: 1.6300 to 1.6476

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in Thursday trading. This is not reflected in the pair’s current movement, as the pound continues to lose ground to the dollar. Short positions continue to dominate the ratio, reflecting a trader bias towards the US dollar making further gains against the pound.

The pound has lost over a cent since Wednesday, and remains under pressure from the dollar in the North American session.

GBP/USD Fundamentals

• 10:00 British CB Leading Index. Estimate 0.4%.
• 13:30 US Core Retail Sales. Exp. 0.2%. Actual 0.4%.
• 13:30 US Retail Sales. Exp. 0.6%. Actual 0.7%.
• 13:30 US Unemployment Claims. Exp. 321K. Actual 368K.
• 13:30 US Import Prices. Exp. -0.7%. Actual -0.6%.
• 15:00 US Business Inventories. Exp. 0.4%. Actual 0.7%.
• 15:30 US Natural Gas Storage. Exp. -85B. Actual -81B.
• 18:01 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

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