GBP/USD – Stable As British CPI Dips to Five-Year Low

GBP/USD is steady on Tuesday, as the pair continues to trade at high levels. In the North American session, GBP/USD is trading in the mid-1.69 range. On the release front, British CPI dipped to 1.5%, a five-year low. Other inflation indicators missed their estimates. In the US, Building Permits softened in May but CPI releases beat their estimates.

It’s become a familiar story in the UK, as CPI, the primary gauge of consumer inflation, lost ground as it posted a gain of 1.5%. This was short of the estimate of 1.7%, and the index’s lowest gain since September 2009. Perhaps more worrying is the fact that with the exception of the April reading, CPI has posted smaller gains every month since last September. However, lower inflation levels will be welcome news for the Bank of England, since it means less pressure on the Bank to raise interest rates. Last week, BOE Governor Carney sparked a run on the pound after saying that rates could go up earlier than expected by the markets. It was a noted departure from the well-worn statements from the Governor that rates would not move prior to 2015. However, with the economic recovery deepening, there is growing sentiment that the BOE could make a rate move sometime this year.

In the US, housing data was a disappointment, as Building Permits dropped to 0.99M, well below the estimate of 1.07M. As well, Housing Starts dropped to 1.00M, shy of the estimate of 1.04M. On the inflation front, CPI moved up modestly, posting a gain of 0.3%. This was the strongest gain we’ve seen since January 2013. CPI followed suit, climbing to an eleven-month high. The index rose to 0.4%, beating the estimate of 0.2%.

The markets are keeping a close eye on the US Federal Reserve, which issues a policy statement on Wednesday, with the markets expecting another $10 billion trim to QE, which would reduce the asset purchase program to $35 billion/month. Fed chair Janet Yellen is not expected to provide any time guidelines about a rate hike, so traders shouldn’t expect a repeat of the fireworks we saw with the British pound, which soared following comments about a possible rate hike by BOE Governor Mark Carney.

 

GBP/USD for Tuesday, June 17, 2014

GBP/USD June 17 at 15:25 GMT

GBP/USD 1.6959 H: 1.6990 L: 1.6938

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6700 1.6825 1.6920 1.7000 1.7183 1.7228

 

  • GBP/USD has edged lower on Tuesday.
  • On the upside, 1.7000 is under pressure. Will the pair break through this key level? 1.7183 is stronger.
  • 1.6920 is a weak support line. 1.6825 is a stronger support level.
  • Current range: 1.6920 to 1.7000.

Further levels in both directions:

  • Below: 1.6920, 1.6825, 1.6700 and 16605
  • Above: 1.70, 1.7183, 1.7228 and 1.7383

 

OANDA’s Open Positions Ratio

GBP/USD continues to show gains in short positions on Tuesday, continuing the trend we saw at the start of the week. This is consistent with the movement of the pair, as the pound has posted slight losses. A significant majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving higher.

GBP/USD has posted slight losses on Tuesday. The pair is unchanged in the North American session.

 

GBP/USD Fundamentals

  • 8:30 British CPI. Estimate 1.7%. Actual 1.5%.
  • 8:30 British PPI Input. Estimate +0.1%. Actual -0.9%.
  • 8:30 British RPI. Estimate 2.5%. Actual 2.4%.
  • 8:30 British Core CPI. Estimate 1.7%. Actual 1.6%.
  • 8:30 British HPI. Estimate 9.1%. Actual 9.9%.
  • 8:30 British PPI Output. Estimate +0.1%. Actual -0.1%.
  • 12:30 US Building Permits. Estimate 1.07M. Actual 0.99M.
  • 12:30 US Core CPI. Estimate 0.2%. Actual 0.3%.
  • 13:00 US CPI. Estimate 0.2%. Actual 0.4%.
  • 13:15 US Housing Starts. Estimate 1.04M.

*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.