GBP/USD – Steady as CPI Continues to Slide

The pound is stable on Tuesday, as GBP/USD is trading in the mid-1.53 range. On the release front, British CPI dropped to 0.3%, matching the forecast. In the US, the Empire State Manufacturing Index slipped to 7.8 points, missing expectations.

British inflation indicators continue to point to sagging inflation. CPI, the primary gauge of consumer inflation, dipped to 0.3% in January, down from 0.5% a month earlier. This marked a record low reading, and BOE Governor Mark Carney is now required to write a letter to the Chancellor of the Exchequer for a second straight month, as inflation has dropped more than 1% below the BOE’s target of 2.0%. Weak inflation levels have eased pressure on the BOE to raise rates, raising speculation that the central bank will not raise rates in 2015. With the US Federal Reserve moving in the opposite direction, divergence with the BOE could continue to weigh on the pound.

In the US, Empire State Manufacturing Index slipped to 7.8 points in February, down sharply from 10.0 points a month earlier. The markets had expected a reading of 8.9 points. This weak reading follows last week’s disappointing reports from retail sales and consumer confidence. On Wednesday, we could see some movement from GBP/USD with the release of three key events – the Federal Reserve minutes, Building Permits and PPI.

GBP/USD for Tuesday, February 17, 2015

GBP/USD February 17 at 16:15 GMT

GBP/USD 1.5334 H: 1.5401 L: 1.5316

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair posted gains in European trade, testing resistance at 1.5392 before retracting. The pair is steady in the North American session.
• 1.5282 continues to provide strong support.
• 1.5392 is a weak resistance line which was tested earlier. 1.5505 is stronger.
• Current range: 1.5282 to 1.5392

Further levels in both directions:

• Below: 1.5282, 1.5165, 1.5008, 1.4873 and 1.4781
• Above: 1.5392, 1.5505, 1.5642 and 1.5786

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Tuesday, continuing the trend seen a day earlier. This is not consistent with the pair, which is almost unchanged on the day. The ratio has a majority of long positions, indicative of trader bias towards the pound moving higher.

GBP/USD Fundamentals

• 9:30 British CPI. Estimate 0.3%. Actual 0.3%.
• 9:30 British PPI Input. Estimate -2.5%. Actual -3.7%.
• 9:30 British RPI. Estimate 1.2%. Actual 1.1%.
• 9:30 British Core CPI. Estimate 1.3%. Actual 1.4%.
• 9:30 British HPI. Estimate 10.3%. Actual 9.8%.
• 9:30 British PPI Output. Estimate -0.2%. Actual -0.5%.
• 13:30 US Empire State Manufacturing Index. Estimate 8.9 points. Actual 7.8 points.
• 15:00 US NAHB Housing Market Index. Estimate 58 points. Actual 55 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.