GBP/USD – Pound Staying Close to 1.30 Ahead of FOMC Rate Statement

GBP/USD has showed little movement on Wednesday, as cautious markets await the Federal Reserve rate policy statement. In the North American session, GBP/USD is trading at 1.2980. In the UK, Public Sector Net Borrowing posted a deficit of GBP 10.1 billion, beating the forecast of GBP 10.5 billion. On Thursday, the US releases unemployment claims.

The pound continues to lose ground on Tuesday, and has dropped below the 1.30 line for the first time in four weeks. The pound has had a rough time since the Brexit vote in June, having contracted some 15 percent in value against the US dollar. If the Federal Reserve sends a hawkish message to the markets, the pound could weaken further. The Bank of England has strongly hinted that it will implement further rate cuts in November, so the markets will be listening closely as Governor Mark Carney and Deputy Governor Jon Cunliffe both deliver speeches on Thursday.

Ahead of the highly-anticipated Federal Reserve announcement, most investment strategists and economists are anticipating that the Fed will hold the benchmark interest rate unchanged and tweak the Federal Open Market Committee (FOMC) statement and use the dot plot to hint at a December rate hike. Fed Chair Yellen is expected to drive the message further during her press conference. Back in August, Yellen spoke in very positive terms about the US economy, and this raised hopes that the Fed might raise rates in September. However, these expectations were largely dashed after the US posted disappointing GDP and employment reports. Recent comments from FOMC members, which have been almost contradictory at times, have left the markets confused and reinforced the perception that the Fed remains divided regarding its near-future monetary policy. A clear and decisive message from Yellen could go a long way in improving market sentiment. If the Fed provides some clues about a December move, the US dollar could move higher. Even if the Fed does go ahead with a December hike, it will prove to be a token raise, coming a year after the last rate hike. In December 2015, the Fed hinted that it expected to implement a series of rate hikes in 2016, but to the market’s chagrin, this never materialized.

GBP/USD Fundamentals

Wednesday (September 21)

  • 4:30 British Public Sector Net Borrowing. Estimate 10.5B. Actual 10.1B
  • 10:30 US Crude Oil Inventories. Estimate 3.2M
  • 14:00 FOMC Economic Projections
  • 14:00 FOMC Federal Funds Rate. Estimate <0.50%
  • 14:30 FOMC Press Conference

Thursday (September 22)

  • 8:30 US Unemployment Claims. Estimate 261K

*All release times are EDT

* Key events are in bold

GBP/USD for Wednesday, September 21, 2016

GBP/USD September 21 at 9:50 EDT

Open: 1.2982 High: 1.3012 Low: 1.2944 Close: 1.2983

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2612 1.2778 1.2899 1.3033 1.3142 1.3219
  • GBP/USD has showed limited movement in the Wednesday session
  • 1.2899 is providing support
  • 1.3033 was tested earlier in resistance and could see further action in the North American session

Further levels in both directions:

  • Below: 1.2899, 1.2778 and 1.2612
  • Above: 1.3033, 1.3142, 1.3219 and 1.3327
  • Current range: 1.2899 to 1.3033

OANDA’s Open Positions Ratio

GBP/USD ratio continues to show slight gains toward long positions. Currently, long positions have a strong majority (68%), indicative of trader bias towards GBP/USD reversing directions and moving to higher ground.

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.