GBP/USD – Pound Subdued Despite Solid British Employment Numbers

GBP/USD is almost unchanged in the Wednesday session, as the pair trades just below the 1.23 line. On the release front, it’s a busy day. The UK released key employment numbers, with the Average Earnings Index and Claimant Count Change both beating their estimates. In the US, today’s highlights are Building Permits and Crude Oil Inventories. On Thursday, the UK will release Retail Sales, one of the most important economic indicators. In the US, there are two major releases – the Philly Fed Manufacturing Index and unemployment claims.

There was good news from the UK labor market, as British employment numbers were strong in September. Average Earnings Index, which measures wage growth, remained steady at 2.3%, matching the forecast. Claimant Count Change gained just 0.7 thousand, beating the forecast of 3.4 thousand. The unemployment rate remained pegged at 4.9% for a fourth straight month. British data in the third quarter has generally been steady, despite market jitters of economic fallout over the UK’s decision to leave the European Union. Inflation continues to move higher, as CPI jumped 1.0% in September, its highest level in almost two years. The rise in inflation is widely attributed to the sharp drop in the pound since the Brexit vote in June. Still, the BoE is expected to cut interest rates to new all-time lows at its next policy meeting in November.

US consumer inflation numbers were mixed on Tuesday. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 64 percent. Meanwhile, US consumer spending impressed in September. Retail sales gained 0.5%, while core retail sales jumped 0.6%, as both key indicators rebounded from declines in August. PPI was steady at 0.3%, but the UoM Consumer Sentiment Index disappointed, dropping to 87.9 points and missing expectations. This marked the weakest reading since September 2015.

GBP/USD Fundamentals

Wednesday (October 19)

  • 4:30 British Average Earnings Index. Estimate 2.3%. Actual 2.3%
  • 4:30 British Claimant Count Change. Estimate 3.4K. Actual 0.7K
  • 4:30 British Unemployment Rate. Estimate 4.9%. Actual 4.9%
  • 5:34 British 10-year Bond Auction. Actual 1.08%
  • 8:30 US Building Permits. Estimate 1.17M
  • 8:30 US Housing Starts. Estimate 1.18M
  • 10:30 Crude Oil Inventories. Estimate 2.2M
  • 13:00 BOE Chief Economist Andy Haldane Speaks
  • 14:00 US Beige Book
  • 19:45 FOMC Member William Dudley Speaks

Upcoming Key Events

Thursday (October 20)

  • 4:30 British Retail Sales. Estimate 0.3%
  • 8:30 US Philly Fed Manufacturing Index. Estimate 5.2
  • 8:30 US Unemployment Claims. Estimate 251K

*All release times are EDT

* Key events are in bold

GBP/USD for Wednesday, October 19, 2016

GBP/USD October 19 at 8:10 EDT

Open: 1.2300 High: 1.2332 Low: 1.2255 Close: 1.2288

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.1844 1.1954 1.2120 1.2447 1.2525 1.2612
  • GBP/USD posted slight losses in the Asian session but has recovered in the European session
  • 1.2120 is providing strong support
  • There is resistance at 1.2447

Further levels in both directions:

  • Below: 1.2120, 1.1954 and 1.1844
  • Above: 1.2447, 1.2525 and 1.2612
  • Current range: 1.2120 to 1.2447

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Wednesday session, consistent with the lack of movement from GBP/USD. Currently, long positions have a strong majority (62%). This is indicative of trader bias towards GBP/USD continuing to move 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.