The British pound has edged above the 1.32 line on Wednesday, continuing the upward movement which has marked GBP/USD this week. The pair is currently trading at 1.3220. On the release front, British BBA Mortgage Approvals dropped to 37.5 thousand, short of expectations. In the US, today’s highlight is Existing Home Sales, with the indicator expected to dip to 5.52 million. On Thursday, the US releases two key events – Core Durable Goods report and Unemployment Claims.
The shock Brexit vote in June shook up the financial markets and sent the pound plunging to 30-year lows. Ever since then, there have been widespread concerns that “hard” UK data in the third quarter would point to a sputtering British economy, possibly even point a recession. However, July releases across sectors looked sharp, as inflation, employment and retail sales all beat their estimates. The pound responded with strong gains last week, climbing 1.2 percent. The rally has continued this week, as the pound has crossed above the 1.32 line on Wednesday and is at its highest level since August 4. On Friday, the UK releases GDP Second Estimate, a key economic report card for the economy. If the indicator matches or beats the forecast, the pound could gain more ground.
With the upcoming Jackson Hole meeting in focus, investors are sticking to the safety of the sidelines, unwilling to make any major moves. This has resulted in a lack of movement in the currency markets so far this week. The conference, which begins on Thursday, will bring together the heads of central banks and other senior financial officials. The markets will be looking for hints from Federal Reserve chair Janet Yellen regarding the Fed’s monetary plans, particularly the timing of a rate hike. FOMC members are expected to express their views in the days leading to the crucial meeting. Fed Vice Chairman Stanley Fischer took the opportunity and sounded upbeat about the US economy, saying that the Fed was close to its aims of a full labor market and the inflation target of 2 percent. The latter claim sounds a bit optimistic, as US inflation levels have consistently been closer to zero than the 2 percent level. Janet Yellen will likely address the inflation issue at Jackson Hole, as inflation levels will be a crucial factor in whether the Fed pulls the rate trigger before 2017. The odds of a September hike are only about 12%, while the likelihood of a December move is around 40%.
Wednesday (August 24)
- 4:30 British BBA Mortgage Approvals. Estimate 38.5K. Actual 37.7K
- 9:00 US HPI. Estimate 0.3%
- 10:00 US Existing Home Sales. Estimate 5.52M
- 10:30 US Crude Oil Inventories. Estimate -0.5M
Thursday (August 25)
- 8:30 US Unemployment Claims. Estimate 265K
- 8:30 US Core Durable Goods Orders. Estimate 0.4%
- All Day – Jackson Hole Symposium
*All release times are EDT
* Key events are in bold
GBP/USD for Wednesday, August 24, 2016
GBP/USD August 24 at 6:05 GMT
Open: 1.3197 High: 1.3235 Low: 1.3159 Close: 1.3224
- GBP/USD was flat in the Asian session. The pair has posted strong gains in European trade
- There is resistance at 1.3327
- 1.3219 remains fluid. This line switched to a support role following gains by GBP/USD
Further levels in both directions:
- Below: 1.3219, 1.3142, 1.3064 and 1.2938
- Above: 1.3327, 1.3480 and 1.3533
- Current range: 1.3327 to 1.3533
OANDA’s Open Positions Ratio
GBP/USD ratio is unchanged, consistent with the lack of movement from GBP/USD. Currently, long positions have a slight majority (53%), indicative of trader bias towards GBP/USD continuing to move upwards.
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.