GBP/USD – Pound Steady as GDP Dips But Matches Forecast

The pound is showing little movement for a second straight day, as GBP/USD trades in the mid-1.60 range in the European session. On the release front, British Preliminary GDP posted a gain of 0.7% in Q3, compared to 0.9% in the Q2 reading. The Index of Services came in at 0.8%, meeting expectations. Over in the US, today’s sole release is New Home Sales. The markets are expecting the indicator to soften this month, with an estimate of 473 thousand.

British Preliminary GDP is one of the most important economic indicators and is closely watched by the markets. The indicator dipped to 0.7% in Q3, down from 0.9% in the previous quarter, revised from 0.8%. This figure matched the forecast, so there was little reaction from the pound. Still, the drop in GDP is a cause for concern, coming on the heels of weak UK data from several sectors on Thursday. Retail Sales, the primary gauge of consumer spending, declined by 0.3%, its worst showing since May. BBA Mortgage Approvals dropped for a third-straight month, slipping to 39.3 thousand. CBI Industrial Order Expectations rounded out the bad news with a reading of -6 points, its worst showing since June 2013.

Earlier in the week, the BoE released the minutes of its last policy meeting, in which the central bank maintained interest rates at 0.50%. The minutes pointed to dissension among the board members, as the vote was 7-2 in favor of holding rates, with the minority arguing in favor of a hike to 0.75%. The release followed remarks by BoE chief economist Andrew Haldane, who said that he was in against raising rates due to concerns about weak domestic and global growth. The vote to maintain QE at 375 billion pounds was unanimous (9-0).

In the US, jobless claims were softer than expected. Unemployment Claims rose to 284 thousand last week, much higher than the previous reading of 264 thousand, and above the estimate of 269 thousand. However, the markets were not too concerned, as the four-week average, which is less volatile than the weekly release, dipped to 281,000, a 14-year low. Meanwhile, weak inflation levels continue to point to slack in the economy. On Wednesday, this trend continued with soft consumer inflation numbers. CPI rose to +0.1%, an improvement from the previous reading of -0.2%. The estimate stood at 0.0%, so the markets clearly did not have high expectations. It was a similar story from Core CPI, which also posted a 0.1% gain, up from 0.0% a month earlier. This was shy of the forecast of 0.2% but still within expectations.

 

GBP/USD for Friday, October 24, 2014

GBP/USD October 24 at 11:15 GMT

GBP/USD 1.6040 H: 1.6072 L: 1.6018

 

GBP/USD Technical

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

 

  • GBP/USD has shown little movement in the Asian and European sessions.
  • The round number of 1.6000 is an immediate support line. 1.5864 is stronger.
  • 1.6141 is a strong line of resistance.
  • 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 is unchanged on Friday, continuing the trend we have seen for most of the week. This is consistent with GBP/USD, which has shown very limited movement. The ratio has a slight majority of long positions, indicative of trader bias towards the pound breaking out and moving upwards.

 

GBP/USD Fundamentals

  • 8:30 British Preliminary GDP. Estimate 0.7%. Actual 0.7%.
  • 8:30 British Index of Services. Estimate 0.9%. Actual 0.8%.
  • 14:00 US New Home Sales. Estimate 473K.

* 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.