The US dollar sustained sharp losses against the pound on Tuesday, but is steady in Wednesday trading. The currency is trading in the mid-1.67 range in the North American session. On the release front, British Trade Balance showed improvement in March and beat the estimate. In the US, today’s highlight is the release of the minutes of the Federal Reserve’s last policy meeting. We could see some movement from the pair following the release.
The UK trade deficit narrowed in March, dropping to -9.1 billion pounds. This was a strong improvement from the previous release of -9.8 billion, and beat the estimate of -9.3 billion. On Tuesday, the pound posted sharp gains on Tuesday, bolstered by an excellent reading from Manufacturing Production. The indicator gained 1.0%, easily surpassing the estimate of 0.3%. There was more good news as NIESR GDP Estimate improved to 0.9%, after two straight readings of 0.8%. This monthly indicator helps analysts gauge GDP, which is released on a quarterly basis.
The Federal Reserve will be front stage and center on Wednesday, as the markets await the releases of the minutes of its most recent policy meeting. Last week, Fed chair Janet Yellen sounded dovish in her outlook on the US economy, saying that inflation and employment levels needed to improve and monetary stimulus would continue for some time. So it shouldn’t be a surprise if the minutes state that the US still has a long way to go on the road to recovery. If the minutes don’t paint an upbeat picture of the US economy, the dollar could lose some ground. Currently, the Fed is purchasing $55 billion in assets each month under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence, which would possibly force the Fed to delay further tapers. As the tapers are dollar-positive, any delay would be bearish for the greenback.
On Friday, US Nonfarm Payrolls improved nicely, climbing to 192 thousand, compared to 175 thousand a month earlier. However, the markets were looking for more, with the estimate standing at 199 thousand. The Unemployment Rate also fell short of the estimate, as it remained unchanged at 6.7%. Although these numbers were not as strong as hoped, the Federal Reserve is expected to continue trimming QE when it meets at the end of April. These tapers mark a vote of confidence in the US economy by the Federal Reserve, and are dollar-positive.
GBP/USD for Wednesday, April 9, 2014
GBP/USD April 9 at 15:15 GMT
GBP/USD 1.6758 H: 1.6759 L: 1.6647
- GBP/USD is steady in Wednesday trade.
- On the downside, 1.6705 continues to provide support. There is stronger support at 1.6549.
- 1.6765 is a weak resistance line and could be tested during the day. Next, there is strong resistance at 1.6896, protecting the 1.69 line.
Further levels in both directions:
- Below: 1.6705, 1.6549, 1.6416, 1.6329 and 1.6236
- Above: 1.6765, 1.6896, 1.70 and 1.7210
OANDA’s Open Positions Ratio
GBP/USD ratio is pointing to gains in short positions on Wednesday, continuing the trend seen a day earlier. This is not consistent with the movement of the pair, as the pound has edged higher. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar turning around and posting gains against the pound.
The pound has taken a breather after its impressive gains on Wednesday. GBP/USD is steady in North American trading.
- 8:30 British Trade Balance. Estimate -9.3B. Actual -9.1B.
- 14:00 US Wholesale Inventories. Estimate 0.5%. Actual 0.5%.
- 14:30 US Crude Oil Inventories. Estimate 1.0M. Actual 4.0M.
- 17:01 US 10-year Bond Auction.
- 18:00 US FOMC Meeting Minutes.
- 23:00 US FOMC Member Daniel Tarullo Speaks.
- 23:01 British RICS House Price Balance. Estimate 44%.
*Key releases are highlighted in bold
*All release times are GMT