GBP/USD – Pound Subdued Despite Stellar Retail Sales Survey

GBP/USD is trading quietly at the 1.32 line on Thursday, continuing the lack of movement which has characterized the pair all week. On the release front, British CBI Realized Sales posted a strong gain of plus -9, well above expectations. Over in the US, durable goods reports and unemployment claims beat their estimates. On Friday, the US releases Preliminary GDP and we’ll also hear from Federal Reserve chair Janet Yellen at the Jackson Hole conference.

More British releases, more positive news about the British economy. The trend continued on Thursday, as CBI Realized Sales sparkled, with a reading of plus -9, crushing the estimate of minus -5. This points to strong consumer confidence who have shrugged off Brexit fears. July and August releases across the economy have looked sharp, as inflation, employment and retail sales numbers all beat their estimates last week. The pound responded with strong gains last week, climbing 1.2 percent. The rally has continued this week, as the pound trades at the 1.32 line. There have been widespread concerns about the Brexit fallout heralding the demise of the British economy, but so far the doomsayers have not been vindicated by third quarter numbers. On Friday, the UK releases GDP Second Estimate, a key economic report card for the economy. If the indicator matches or beats the forecast of 0.6%, the pound could gain more ground.

After some dismal readings in the second quarter, US durable goods recovered in July. Core Durable Goods Orders rebounded after two declines, posting an excellent gain of 1.5%. This easily beat the forecast of 0.4%. Durable Goods Orders also impressed with a sharp gain of 4.4%, compared to the forecast of 3.4%. This marked the strongest gain since January. The strong readings point to stronger demand for durable goods, which should translate into increased investment and hiring in the business sector. There was more good news on the labor front, as unemployment claims dropped to 261 thousand, its third decline in as many weeks.

After a mostly uneventful week, the markets will their attention to scenic Wyoming, where central bankers and other senior policymakers meet for a 3-day summit at Jackson Hole. With investors sticking to the sidelines ahead of the meeting, there has been a notable lack of movement in the currency markets so far this week. 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. Federal policymakers are divided over a rate hike, as the US labor market is red-hot, but inflation levels remains very low. Fed chair Janet Yellen will address the conference on Friday, and the markets will be looking for some feedback about the labor market and the inflation picture. As well, the US will release Preliminary GDP for the second quarter. In July, a soft Advance GDP sent the dollar downwards, as the economy expanded 1.2%, well short of the forecast of 2.6%. The estimate for the Preliminary GDP report stands at 1.1% and an unexpected reading could affect the movement of GBP/USD.

GBP/USD Fundamentals

Thursday (August 25)

• 6:00 British CBI Realized Sales. Estimate -5. Actual +9
• 8:30 US Unemployment Claims. Estimate 265K. Actual 261K
• 8:30 US Core Durable Goods Orders. Estimate 0.4%. Actual 1.5%
• 8:30 US Durable Goods Orders. Estimate 3.4%. Actual 4.4%
• 9:45 US Flash Services PMI. Estimate 51.9
• 10:30 US Natural Gas Storage. Estimate 22B
• All Day – Jackson Hole Symposium

Friday (August 26)

• 8:30 US Preliminary GDP. Estimate 1.1%
• 10:00 Federal Reserve Chair Janet Yellen Speaks
• 10:00 US Revised UoM Consumer Sentiment. Estimate 90.6
• All Day – Jackson Hole Symposium

*All release times are EDT

* Key events are in bold

GBP/USD for Thursday, August 25, 2016

GBP/USD August 25 at 9:35 GMT

Open: 1.3236 High: 1.3263 Low: 1.3170 Close: 1.3192

GBP/USD Technical

• GBP/USD showed limited movement in the Asian session and posted small losses on EUR/USD. The pair is unchanged early in North American trade
• 1.3142 is providing support
• 1.3219 remains fluid. This line has switched to a resistance role following slight losses by GBP/USD

Further levels in both directions:

• Below: 1.3142, 1.3064 and 1.2938
• Above: 1.3219, 1.3327, 1.3480 and 1.3533
• Current range: 1.3142 to 1.3219

OANDA’s Open Positions Ratio

GBP/USD ratio has shown slight movement towards short positions. Currently, long and short positions are evenly split, indicative of a lack trader bias as to what direction GBP/USD will take next.

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.