GBP/USD – Pound Ticks Lower, Markets Eye GfK Consumer Confidence

GBP/USD has recorded small losses on Tuesday, as the pair trades slightly below the 1.31 level. On the release front, British Net Lending to Individuals dropped to GBP 3.8 billion, well short of the forecast. Later in the day, GfK Consumer Confidence is expected to come in at -8 points. In the US, today’s highlight is CB Consumer Confidence. The indicator is expected to remain steady, with a forecast of 97.2 points. On Wednesday, the US will release two key events – ADP Nonfarm Employment Change and Pending Home Sales.

The US dollar posted broad gains following Janet Yellen’s speech at the Jackson Hole gathering of central bankers. The Fed chair’s message to the markets was clearly upbeat, as she acknowledged that the case for a rate increase had “strengthened in recent months”. Yellen noted that the economy was close to maximum employment, inflation was steady, and consumer spending remained solid. At the same time, Yellen did not provide any timeline on a rate hike nor did she spell out what the Fed wants to see before pressing the rate trigger. On Friday, Fed members Dennis Lockhart and Stanley Fischer both came out in favor of two rate hikes in 2016, and these comments helped the dollar record broad gains on Friday. The Fed’s stance has raised the odds of a rate move according to the CME Group FedWatch tool, with a September hike priced at 30% in September and 57% for a December hike. However, given that any move by the Fed will be data-dependent, US numbers ahead of the Fed policy meeting on September 21 could significantly change the rate outlook.

Fears that fallout from the Brexit vote would herald the demise of the British economy have so far proven to be unfounded. The positive trend continued last week, as CBI Realized Sales sparkled, with a reading of plus -9, crushing the estimate of minus -5. This indicates that consumer confidence remains strong despite Brexit. July and August releases across the economy have impressed, as inflation, employment and retail sales numbers all pointed to expansion. GDP posted a solid gain of 0.6% in the second quarter, and if the markets buy into the notion that the economy has weathered the Brexit storm, the pound could respond with gains.

GBP/USD Fundamentals

Tuesday (August 30)

  • 4:30 British Net Lending to Individuals. Estimate 4.9B. Actual 3.8B
  • 4:30 British M4 Money Supply. Estimate 1.2%. Actual 1.2%
  • 4:30 British Mortgage Approvals. Estimate 63K. Actual 61K
  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.1%
  • 19:05 British GfK Consumer Confidence. Estimate -8 points
  • 10:00 US CB Consumer Confidence. Estimate 97.2

Wednesday (August 31)

  • 8:15 US ADP Non-Farm Employment Change. Estimate 173K
  • 10:00 US Pending Home Sales. Estimate 0.7%

*All release times are EDT

* Key events are in bold

GBP/USD for Tuesday, August 30, 2016

GBP/USD August 30 at 6:55 GMT

Open: 1.3104 High: 1.3111 Low: 1.3058 Close: 1.3091

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2849 1.2938 1.3064 1.3142 1.3219 1.3327
  • GBP/USD posted slight gains in the Asian session and is flat in European trade
  • 1.3064 was tested earlier in support and could break in the North American session
  • There is resistance at 1.3142

Further levels in both directions:

  • Below: 1.3064, 1.2938 and 1.2849
  • Above: 1.3142, 1.3219, 1.3327 and 1.3480
  • Current range: 1.3064 to 1.3142

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little change on Tuesday, consistent with the lack of movement from GBP/USD. Long positions have a small majority (52%), indicative of trader bias towards GBP/USD moving reversing directions and moving 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.