GBP/USD – Pound Remains Under Pressure on Mixed British Releases

The British pound continues to trade at low levels on Tuesday. In the North American session, GBP/USD is trading in the mid-1.60 range, its lowest level since November. On the release front, UK numbers were mixed. Manufacturing Production posted a 0.3%, matching the forecast. The UK trade deficit widened last month, while the NIESR GDP Estimate edged up to 0.6%. Over in the US, JOLTS Job Openings was unchanged last month and fell short of the estimate.

US numbers continue to point to a deepening recovery, but the labor market is showing some troubling signs. JOLTS Job Openings was unchanged in August at 4.67 million, short of the estimate of 4.72 million. On Friday, the eagerly-anticipated Nonfarm Employment Change crashed to 142 thousand, its lowest gain since January. This surprised the markets, which had expected a gain of 226 thousand. The disappointing release follows a weak ADP Nonfarm Payrolls report as well as a rise in unemployment claims.

British Manufacturing Production, a key event, was unchanged last month, posting another gain of 0.3%. This matched the forecast. There was positive news from the NIESR GDP Estimate, which rose to 0.6%, up from 0.5% last month. At the same time, the trade deficit rose to 10.2 billion pounds, compared to 9.4 billion last month. The markets had expected the deficit to fall to 9.1 billion. All eyes will now shift to the Inflation Report Hearings, which traders should treat as a market-mover.

The pound’s latest troubles are blowing north of London, as Scottish voters will vote in a referendum on independence later this month. Polls taken on the weekend show that supporters of independence are gaining ground and hold a slight majority. If voters do choose to secede from the UK, this would create a lot of questions and uncertainty, including what currency an independent Scotland would use. As voting day looms closer, we are likely to see more pressure on the pound.

There were no surprises from the BoE late last week, which made no changes to its monetary policy. The central bank maintained interest rate levels at 0.50%, where rates have been pegged since February 2009. With two MPC members voting in favor of raising rates last month, the markets will be keenly interested in seeing the breakdown of Thursday’s vote, which will be released in two weeks time. If the minutes show that additional MPC members are in favor of a rate hike, BoE Governor Mark Carney will be under pressure to raise rates, which would bolster the pound. The central bank also kept QE steady at 375 billion pounds.

GBP/USD for Tuesday, September 9, 2014

GBP/USD September 9 at 16:20 GMT

GBP/USD 1.6070 H: 1.6156 L: 1.6064

GBP/USD Technical

• The pound continues to lose ground and is testing support at the round number of 1.60. The next support line is at 1.5864.
• 1.6141 has reverted to a resistance role as the pound has lost ground.
• Current range: 1.6000 to 1.6141.

Further levels in both directions:

• Below: 1.6000, 1.5864, 1.5731 and 1.5628
• Above: 1.6141, 1.6263, 1.6382 and 1.6484

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Tuesday, continuing the direction seen a day earlier. This is consistent with the pair’s movement, as the pound has posted small losses. The ratio has a majority of long positions, indicative of trader bias towards the pound reversing directions and moving higher.

GBP/USD Fundamentals

• 8:30 British Manufacturing Production. Estimate 0.3%. Actual 0.3%.
• 8:30 British Trade Balance. Estimate -9.1B. Actual -10.2B.
• 8:30 British Industrial Production. Estimate 0.2%. Actual 0.5%.
• 10:45 BOE Governor Mark Carney Speaks.
• 11:30 US NFIB Small Business Index. Estimate 95.9 points. Actual 96.1 points.
• 13:55 British NIESR GDP Estimate. Actual 0.6%.
• 14:00 US JOLTS Job Openings. Estimate 4.72M. Actual 4.67M.
• 14:00 US FOMC Member Daniel Tarullo Speaks.
• 17:00 British MPC Member Andy Haldane Speaks.

* Key releases are highlighted in bold

*All release times are GMT

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