GBP/USD – Pound Pushes to 3-week Highs as Construction PMI Beats Forecast, BoE Next

GBP/USD has posted gains on Wednesday, after an uneventful start to the week. In the North American session, the pair is trading at the 1.23 line. On the release front, British Construction PMI improved to 52.6 points, beating the estimate of 51.9. In the US, ADP Nonfarm Employment, dropped to 147 thousand, well short of the estimate of 166 thousand. Later in the day, the Federal Reserve will conclude its policy meeting and is expected to maintain the benchmark interest rate at 0.25 percent. On Thursday, the US releases unemployment claims and the ISM Non-manufacturing PMI. The UK will publish British Services PMI and the BoE will set the benchmark interest rate.

British construction activity improved slightly in October, as Construction PMI rose to 52.6 points. This marked the indicator’s highest level since March. On Wednesday, Manufacturing PMI dropped to 54.3, within expectations. The markets are anxiously awaiting the BoE’s policy meeting on Thursday, as the bank must decide whether to lower rates for the second time since August. The markets are expecting the benchmark rate to remain unchanged at 0.25%, as higher inflation and generally positive economic numbers have lessened pressure on the BoE to ease monetary policy.

The Federal Reserve is in the spotlight, as the bank concludes a 2-day policy meeting on Wednesday. The markets are expecting the Fed to remain on the sidelines, given that the US presidential election takes place next week. The rate statement will be carefully monitored, as analysts comb for hints about the extent of support among FOMC members ahead of the crucial December meeting. There was positive news from the US consumer front on Monday, as Personal Spending rebounded with a 0.5% gain in September, after a flat reading of 0.0% in August. Gold responded to the reading with slight losses. This release comes on the heels of a disappointing consumer spending report on Friday, as UoM Consumer Sentiment fell to 87.2 points in October, below expectations and dropping to its lowest level since August 2015.

GBP/USD Fundamentals

Wednesday (November 2)

  • 3:00 British Nationwide HPI. Estimate 0.2%. Actual 0.0%
  • 5:30 British Construction PMI. Estimate 51.9. Actual 52.6
  • 8:00 BoE Inflation Report
  • 8:00 MPC Official Bank Rate Votes. Estimate 0-0-9
  • 8:00 BoE Monetary Policy Summary
  • 8:00 BoE Official Bank Rate. Estimate 0.25%
  • 8:00 BoE Asset Purchase Facility. Estimate 435B
  • 8:00 BoE Asset Purchase Facility Votes. Estimate 0-0-9
  • 8:30 BoE Governor Mark Carney Speaks
  • 8:15 ADP Nonfarm Employment Change. Estimate 166K. Actual 147K
  • 10:30 US Crude Oil Inventories. Estimate 1.6M. Actual 14.4M
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <0.50%. Actual <0.50%

Upcoming Key Events

Thursday (November 3)

  • 5:30 British Services PMI. Estimate 52.5
  • 8:30 US Unemployment Claims
  • 8:30 US ISM Non-manufacturing PMI. Estimate 56.2 points

*All release times are EDT

* Key events are in bold

GBP/USD for Wednesday, November 2, 2016

GBP/USD November 2 at 11:20 EDT

Open: 1.2236 High: 1.2355 Low: 1.2218 Close: 1.2302

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.1954 1.2120 1.2272 1.2351 1.2479 1.2620
  • GBP/USD was flat in the Asian session. The pair has posted gains in the European and North American session
  • 1.2272 is providing support
  • 1.2351 was tested in resistance earlier and is a weak line

Further levels in both directions:

  • Below: 1.2272, 1.2120, 1.1954 and 1.1844
  • Above: 1.2351, 1.2479 and 1.2620
  • Current range: 1.2272 to 1.2351

OANDA’s Open Positions Ratio

GBP/USD ratio is showing considerable movement towards short positions, consistent with strong gains by GBP/USD which has led to the covering of long positions. Currently, long positions command a strong majority (61%), indicative of trader bias towards GBP/USD breaking out and moving higher.

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.