GBP/USD – Little Activity Ahead of UK Inflation Numbers

The pound is showing little movement in Monday trade, as GBP/USD is trading just below the 1.65 line in the North American session. The pound had a week to forget, coughing up about 160 points against the dollar. It’s a very quiet day on the release front. In the US, Flash Manufacturing PMI weakened in February and fell short of the estimate. There are no British releases on Monday, but we’ll see a host of inflation indicators on Tuesday, highlighted by CPI.

The US dollar surged against its major rivals following the Federal Reserve’s policy meeting on Wednesday, the first meeting headed by Janet Yellen. The decision to trim QE by another $10 billion was widely expected, but her comments at the follow-up press conference gave the dollar a big boost against its major rivals. Yellen said that the Fed was on track to wind up QE in the fall, and could start to raise interest rates six months later. This is a more aggressive approach towards higher rates than the markets had expected, and the dollar responded with gains against the pound.

The Ukrainian crisis is deepening. Russian President Vladimir Putin signed a deal on Friday which formally annexed Crimea to Russia, while Western countries are scrambling to respond to Russia’s lightning takeover of the Ukrainian region. The commander of U.S. and NATO forces in Europe said that Russia had assembled a large force on Ukraine’s eastern border and could attack at any time. Meanwhile, Ukraine says it has ordered its troops in Crimea to withdraw to the mainland, in order to de-escalate the extremely tense situation. The troop withdrawal marks a tacit recognition of the Russian annexation of Crimea.

In the UK, Employment Claims continues to post strong releases. The indicator dropped by 34.6 thousand last month, easily beating the estimate of -23.3 thousand. The Unemployment Rate remained at 7.2%, matching the forecast. The BOE has tried to lower expectations of a rate hike, but with the economy continuing to grow, there is growing sentiment that we could see a rate hike within the next 12 months. As expected, the BOE decisions to maintain QE and interest rates last week were both unanimous, by a vote of 9-0.

GBP/USD for Monday, March 24, 2014

GBP/USD March 24 at 16:20 GMT

GBP/USD 1.6490 H: 1.6511 L: 1.6466

GBP/USD Technical

• GBP/USD is steady in Monday trade. The pair has been trading near the 1.65 for most of the day.
• On the downside, 1.6416 is providing support. This is followed by support at 1.6329.
• 1.6549 continues to provide resistance. There is stronger resistance at 1.6705.
• Current range: 1.6416 to 1.6549.

Further levels in both directions:

• Below: 1.6416, 1.6329, 1.6236 and 1.6146
• Above: 1.6549, 1.6705, 1.6765, 1.6896 and 1.6964

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Monday, continuing the trend we saw on Friday. This is not consistent with what we are seeing from the pair, as the pound has steadied after last week’s losses. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar resuming its rally against the pound.

The pair is trading near the 1.65 line on Monday. The pair is steady in the North American session.

GBP/USD Fundamentals

• 13:45 US Flash Manufacturing PMI. Estimate 56.6 points. Actual 55.5 points.
• All Day – G7 Meetings.
  

*Key releases are highlighted in bold

*All release times are GMT

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