GBP/USD – Sliding Pound Dips Below 1.50

The pound is trading below the symbolic line of 1.50 on Friday, following sharp losses a day earlier. In Friday’s European session, GBP/USD is trading at 1.4982. On the release front, the pound shrugged off a gain of 0.4% by Retail Sales in December. In the US, today’s highlight is US Existing Home Sales. The markets are expecting a jump in the December report, with an estimate of 5.08 million.

British Retail Sales, a key indicator, posted a gain of 0.4%, beating the estimate of -0.6%. On Wednesday, there was good news on the UK employment front, which has consistently been a bright spot in the British economy. Claimant Count Change dropped by 29.7 thousand, easily beating the forecast of -24.2 thousand. The unemployment rate followed suit and dropped from 5.9% to 5.8%. There was an important shift in the BOE voting pattern on the previous interest rate decision, with a unanimous (9-0) vote to maintain rates at their current level of 0.50%. This marked a change from recent votes, in which two members had voted in favor of raising rates. The unanimous decision reflects the “new order” in which the UK and other industrialized countries must deal with rapidly falling inflation, due in large part to oil prices which have fallen by 50% since the summer. This has eased pressure on the BOE to raise interest rates, a move which would boost the pound.

The markets had expected the ECB to pull the QE  trigger on Thursday, but Mario Draghi has often underwhelmed in his monetary moves, so a QE package worth €1 trillion sent the euro reeling against the US dollar. The QE scheme will see the ECB purchase €60 billion each month, commencing in March and scheduled to last until late 2016. The ECB has been under increasing pressure to combat deflation in the Eurozone, as underscored by a December inflation reading of -0.2%. In remarks on Thursday, Draghi acknowledged that ECB efforts to fight deflation had been insufficient. Thursday’s dramatic move demonstrates a strong determination by the ECB to “take the bull by its horns” in the battle to bolster inflation and kick-start the ailing Eurozone economy.

GBP/USD for Friday, January 23, 2015

GBP/USD January 23 at 12:05 GMT

GBP/USD 1.4982 H: 1.5024 L: 1.4957

GBP/USD Technical

• GBP/USD was steady in the Asian session, with the pair testing resistance at 1.5008. The pair has edged lower in European trade.
• 1.5008 has reverted to a resistance role following sharp losses by the pound. This line had provided support since July 2013. There is stronger resistance at 1.5165.
• 1.4873 is providing strong support.
• Current range: 1.4873 to 1.5008

Further levels in both directions:

• Below: 1.4873, 1.4781, 1.4670 and 1.4562
• Above: 1.5008, 1.5165, 1.5282, 1.5392 and 1.5505

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Friday. 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 moving upwards.

GBP/USD Fundamentals

• 9:00 British Retail Sales. Estimate -0.6%. Actual +0.4%.
• 14:45 US Flash Manufacturing PMI. Estimate 54.1 points.
• 15:00 US Existing Home Sales. Estimate 5.08M.
• 15:00 US CB Leading Index. Estimate 0.5%.

*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.