GBP/USD – Slight Gains in Light Trade

GBP/USD has posted small gains on Monday, as the pair trades at the 1.57 line in the North American session. On the release front, it’s a quiet start to the week, with just one US release on the day. The Flash Services PMI continues to lose ground, dipping to 56.3 points in November. This fell short of the estimate of 57.3 points and marked the indicator’s lowest reading since May. There are no British releases on Monday.

In the UK, retail sales and manufacturing indicators pointed upwards in October. Retail Sales posted a strong gain of 0.8%, bouncing back from the previous reading of -0.3%. The indicator easily beat the estimate of 0.4%. CBI Industrial Order Expectations also looked sharp, posting a gain of 3 points. This broke a streak of two straight declines and beat the forecast of -3 points.

US consumer inflation remains weak, but met expectations in November. CPI posted a flat 0.0%, edging above the estimate of -0.1%. Core CPI posted a gain of 0.2%, matching the forecast. Unemployment Claims came in at 291 thousand higher than the estimate of 286 thousand. There was good news as well, as the Philly Fed Manufacturing Index soared to 40.8 points, its highest since March 2011. The estimate stood at 18.9 points. As well, Existing Home Sales improved to 5.26 million, a one year high. The markets had expected a reading of 5.16 million.

The BoE votes on QE and interest rates were released on Wednesday and the vote breakdown was as expected. 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.

The Federal Reserve released its minutes on Wednesday and there were no clues about the timing of a rate hike. The markets are expecting rates to rise in the second half of 2015, but this will of course depend on economic conditions. With inflation below the Federal Reserve target of 2%, there is less pressure on the Fed to raise rates. The minutes also noted that weak economic outlooks in Europe and Japan are unlikely to have a negative impact on the US economy.

GBP/USD for Monday, November 24, 2014

GBP/USD November 24 at 16:25 GMT

GBP/USD 1.5712 H: 1.5712 L: 1.5629

GBP/USD Technical

• GBP/USD was uneventful in the Asian session. The pair posted gains in the European session and early in the North American session.
• On the upside, 1.5717 is under strong pressure. Will the pair break above this line? 1.5864 is stronger.
• 1.5644 is providing support.
• 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 has a majority of long positions, indicative of trader bias towards the pound moving higher.

GBP/USD Fundamentals

•  14:20 US Flash Services PMI. Estimate 57.3 points.

* 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.