GBP/USD – Slight Gains for Pound Ahead of Fed Minutes

GBP/USD has posted modest gains on Wednesday, as the pair trades in the mid-1.56 range. On the release front, there were no surprises from the BoE, which maintained QE and interest rate levels. In the US, housing numbers were a mix, as Building Permits climbed to 1.08 million, while Housing Starts edged lower to 1.01 million. Later in the day, the FOMC releases the minutes of its last policy meeting, and the markets will be looking for hints of the timing of an interest rate hike by the Federal Reserve.

The BoE votes on QE and interest rates were as expected on Wednesday. The vote was unanimous (9-0) to maintain QE at 375 billion pounds, while the vote on interest rate levels was 7-2, with seven MPC members in favor of maintaining rates at 0.50%, while two members were in favor of raising rates. A major factor in the vote was the soft inflation numbers we’re seeing out of the UK. The BoE is expected to raise rates sometime in 2015, but low inflation gives Governor Mark Carney some breathing room before having to step in with a rate hike. Last week, the BoE Inflation Report was unexpectedly dovish, resulting in the pound tumbling over 100 points.

On Tuesday, the UK released a host of inflation indicators, led by CPI, the primary gauge of consumer inflation. There were no surprised, as all of the indicators met expectations. The index improved to 1.3%, just above the estimate of 1.2%, which was the reading last month. Although the increase was marginal, it ended a streak of three straight readings where CPI has weakened. The pound shrugged off the readings, and remains close to 14-month lows.

US inflation numbers have been persistently weak, but the news was good on Tuesday, as PPI beat expectations with a modest gain of 0.2%. This marked a 4-month high and beat the estimate of -0.1%. Core PPI, which excludes the most volatile items counted in PPI, posted a gain of 0.4%, above the forecast of 0.2%. This was the index’s best showing since April. We’ll get a look at consumer inflation data on Thursday.

GBP/USD for Wednesday, November 19, 2014

GBP/USD November 19 at 17:20 GMT

GBP/USD 1.5672 H: 1.5700 L: 1.5586

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5392 1.5505 1.5644 1.5717 1.5864 1.6000

 

  • GBP/USD was uneventful in the Asian session. The pair posted sharp gains in the European session, breaking past resistance at 1.5644. The pair retracted slightly in North American trading.
  • On the upside, 1.5717 held firm as the pound posted strong gains earlier. This is a weak line which could see further action during the North American session.
  • 1.5644 has reverted to a support role as the pair trades at higher levels. 1.5505 is stronger.
  • Current range: 1.5644 to 1.5717

Further levels in both directions:

  • Below: 1.5644, 1.5505, 1.5392 and 1.5282
  • Above: 1.5717, 1.5864, 1.6000, 1.6141 and 1.6263

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Wednesday, reversing the trend which marked the pair since the start of the week. This is not consistent with the movement of GBP/USD, which has posted slight gains. The ratio is close to a split between long and short positions, indicative of a lack of trader bias as to what to expect from the pair.

 

GBP/USD Fundamentals

  • British MPC Official Bank Rate Votes. Estimate 2-0-7. Actual 2-0-7.
  • British MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9.
  • 13:30 US Building Permits. Estimate 1.04M. Actual 1.08M.
  • 13:30 US Housing Starts. Estimate 1.03M. Actual 1.01M.
  • 15:30 US Crude Oil Inventories. Estimate -0.7M. Actual 2.6M.
  • 19:00 US FOMC Meeting Minutes.

* 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.