GBP/USD is almost unchanged on Friday, in sharp contrast to the pound rally on Wednesday, when GBP/USD surged over 200 points. The pound is currently trading at 1.5450. US numbers were a mix, as UOM Consumer Sentiment jumped to 92.1 points, easily beating the estimate of 88.8 points. However, JOLTS Jobs Openings softened, coming in at 5.37 million. This surprised the markets which had expected a gain 5.77 million.
The pound was up sharply earlier this week, boosted by a drop in the unemployment rate, which fell to 5.4% in September. This marks the lowest rate we’ve seen since 2008. Although unemployment claims were up in September, the markets chose to focus on the unemployment rate as well as a strong Average Earnings report of 3.0%, which was within expectations. The British economy is showing some signs of strength, but remains handicapped by negligible inflation levels. CPI, the primary gauge of consumer inflation, came in at -0.1% in September, shy of the estimate of 0.0%. The UK economy has been performing well and wage growth has risen, but a rate hike in the near future remains unlikely, given the persistently weak inflation levels. Still, the markets liked what they saw on Wednesday and the pound took full advantage.
Thursday was a day of mixed messages from US releases. Low inflation levels in the US continue to hamper the domestic economy, as underscored by September’s consumer inflation reports. CPI posted a decline of 0.2%, its lowest level since January. Still, this figure matched the forecast. Core CPI was a bit stronger, with a gain of 0.2%. On the employment front, unemployment claims were very strong, dropping to 255 thousand, compared to an estimate of 269 thousand. Will JOLTS Job Openings follow suit with a strong reading on Friday?
Meanwhile, US manufacturing numbers in October were dismal. The Empire State Manufacturing Index posted its third straight decline, coming in at -11.4 points, missing the forecast of -7.3 points. The Philly Fed Manufacturing Index, a key release, came in at -4.5 points, shy of the estimate of -1.8 points. These figures point to contraction in the US manufacturing sector, which continues to suffer from weak global demand.
What message is the Fed trying to send to the markets? Federal Reserve policymakers seem divided on the question of a rate hike in 2015. This was underscored this week by FOMC member Lael Brainard, who stated that the Fed should not raise rates before global economic conditions improve. Brainard noted that the Chinese slowdown has caused economic turmoil worldwide, and the US economy could lose steam due to weaker exports and weak global economic conditions. On the other end of the spectrum, another member of the FOMC, Dennis Lockhart, sounded more optimistic about a rate hike before the end of 2015. Lockhart did not rule out a rate hike in October, and added that the Fed would have more data to evaluate before its December policy meeting. With FOMC members sending out such conflicting messages, it is no wonder that the frustrated markets have been unable to get a handle on the timing of a rate hike, and this failure of the Fed to communicate a clear message to the Fed has hurt the US dollar, as we saw after the release of the Fed minutes last week.
Friday (Oct. 16)
- 10:30 External BOE MPC Member Kristin Forbes Speaks.
- 13:15 US Capacity Utilization Rate. Estimate 77.4%.
- 13:15 US Industrial Production. Estimate -0.2%.
- 14:00 US Preliminary UoM Consumer Sentiment. Estimate 88.8 points. Actual 92.1 points.
- 14:00 US JOLTS Job Openings. Estimate 5.77M. Actual 5.37M.
- 14:00 US Preliminary UoM Inflation Expectations.
- 20:00 US TIC Long-Term Purchases. Estimate 24.3B.
*Key releases are highlighted in bold
*All release times are GMT
GBP/USD for Friday, October 16, 2015
GBP/USD October 16 at 12:00 GMT
GBP/USD 1.5450 H: 1.5374 L: 1.5252
- GBP/USD has showed very little movement during the day.
- 1.5485 has been tested during the day and could see further action. It is a weak resistance line.
- 1.5341 has strengthened in support.
- Current range: 1.5341 to 1.5485
Further levels in both directions:
- Below: 1.5341, 1.5269, 1.5163 and 1.5026
- Above: 1.5485, 1.5590 and 1.5660
OANDA’s Open Positions Ratio
GBP/USD ratio is showing movement towards short positions on Friday, as short positions have a majority (56%), pointing to trader bias towards the US dollar improving against the pound.
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.