GBP/USD – Pound Recovers, Pushes to 1.61

After sharp losses earlier in the week, the pound has rebounded. In Friday’s European session, GBP/USD is trading at the 1.61 line. On the release front, there are no UK releases on Friday. Over in the US, it’s another busy day, with the release of Building Permits and UoM Consumer Sentiment. As well, Federal Reserve Chair Janet Yellen will deliver remarks at an event in Boston.

On Wednesday, the pound got a boost thanks to strong British numbers and disappointing US data. In the UK, Average Earnings Index edged up to 0.7%, matching the estimate. This was a four-month high for the indicator, which is an important indicator of consumer inflation. On the employment front, Claimant Count Change continues to drop, but the reading of -18.6 thousand was well off the forecast of -34.2 thousand. Meanwhile, the unemployment rate dropped from 6.2% to 6.0%, its lowest level since November 2008.  In the US, retail sales and inflation numbers sagged. Core Retail Sales dipped 0.2%, its first decline since April 2013. It was a similar story with Core Retail Sales, which posted a decline of 0.3%, its first loss since January. This points to a decrease in consumer spending, a key component of economic growth. Meanwhile, PPI fell by 0.1%, after a reading of 0.0% a month earlier. All three events missed their estimates.

There was better news on Thursday, as US Unemployment Claims dropped to 264 thousand, marking a 14 -year low. The estimate stood at 286 thousand. Manufacturing numbers were a mix, as Industrial Production gained 1.0%, its best showing since November. The Philly Fed Manufacturing Index dipped to 20.7 points, but this beat the estimate of 19.9 points.

British CPI, the primary gauge of consumer inflation, continues to lose ground. The index dropped to 1.2%, a five-year low and short of the estimate of 1.4%. Core CPI and PPI Input also missed their estimates, as inflation indicators continue to point downwards. The weak CPI reading gives Governor Mark Carney more breathing room to maintain current interest rate levels, and investors responded to the news by dumping their pound holdings on Tuesday. There is growing sentiment that the BoE could delay a rate hike until the second half of 2014, with inflationary pressures continuing to recede.

 

GBP/USD for Friday, October 17, 2014

GBP/USD October 17 at 13:45 GMT

GBP/USD 1.6101 H: 1.6130 L: 1.6030

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5717 1.5864 1.6000 1.6141 1.6263 1.6382

 

  • GBP/USD was flat in the Asian session. In European trade, the pair has been marked by choppy trade..
  • The round number of 1.6000 is providing strong support.
  • 1.6141 is an immediate resistance line. 1.6263 is stronger.
  • Current range: 1.6000 to 1.6141

Further levels in both directions:

  • Below: 1.6000, 1.5864, 1.5717, 1.5644 and 1.5460
  • Above 1.6141, 1.6263, 1.6382 and 1.6484

 

OANDA’s Open Positions Ratio

GBP/USD ratio has a majority of long positions, indicative of trader bias towards the pound continuing to move higher.

 

GBP/USD Fundamentals

  • 12:30 US Building Permits. Estimate 1.04M.
  • 12:30 US Fed Chair Janet Yellen Speaks.
  • 12:30 US Housing Starts. Estimate 1.02M.
  • 13:55 US Preliminary UoM Consumer Sentiment. Estimate 84.3 points.
  • 13:55 US Preliminary UoM Inflation Expectations.

* Key releases are in highlighted 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.