GBP/USD – Pound Mostly Steady on Election Day in America

GBP/USD has posted slight losses on Tuesday, following sharp losses in the Monday session. In the North American session, the pair is trading slightly above the 1.2370 line. On the release front, British Manufacturing Production gained 0.6%, edging above the forecast of 0.5%. US JOLTS Job Openings improved to 5.49 million, but this figure was well off the forecast of 5.67 million. It is Election Day in the US, as the markets anxiously wait to see who will become the next president of the United States.

British numbers continue to beat the estimates in the third quarter. Manufacturing Production, a key event, jumped to 0.6% in September, its best gain since April. There were dire warnings about fallout from the June Brexit vote, but the harm to the economy was not nearly as severe as many analysts expected. Last week the BoE was forced to backtrack and acknowledge the steady performance of the economy, as the bank revised upwards its growth forecasts. Stronger inflation numbers and solid data have given the BoE some breathing room, allowing the bank to avoid a rate cut at last week’s policy meeting.

There was dramatic news on the Brexit front on Thursday, as the High Court ruled that the government cannot invoke Article 50, the mechanism for leaving the EU, without parliamentary approval. This has raised hopes of a “soft Brexit”, whereby the exit from Europe will be less economically disruptive as the government will have to ensure that the Brexit move receives a majority from members of parliament, a majority of whom wanted Britain to remain in the EU. The government has appealed the ruling, which will be heard by the Supreme Court in early December. Still, the ruling is undoubtedly a setback for the government. BoE Governor Mark Carney said that the court decision underscores that there will be “uncertainty and volatility” as Britain and Europe prepare to negotiate Britain’s departure from the EU.

After months of a bitter and bruising election campaign, US voters in their millions have lined up at the polls and choose either Hillary Clinton or Donald Trump as their new president. Although polls continue to point to a tight race, Clinton appears to have the upper hand as she has an easier path to garnering the 270 electoral votes needed to claim victory. The most recent polls indicate that voters favor Clinton over Donald Trump by a margin of three to five percent. On the weekend, the Clinton campaign received a boost as the FBI announced that it had no reason to change its conclusion that Clinton should not face criminal charges in her use of private emails while she was secretary of state. There are different market scenarios depending on the actual outcome of the election, with the worst case scenario being a too-close-to-call result. If either candidate fails to deliver a decisive victory, the leadership vacuum and uncertainty surrounding the result could trigger higher volatility in the markets. However, if Clinton wins a clear victory, the US dollar could respond with broad gains. The election could also have a significant effect on monetary rate policy. Currently, the odds of a rate hike in December stands at 71.5 percent.However, if the election results trigger market volatility, the Federal Reserve could hold off from raising interest rates at its next policy meeting in December.

 

GBP/USD Fundamentals

Tuesday (November 8)

  • 4:30 British Manufacturing Production. Estimate 0.5%. Actual 0.6%
  • 4:30 British Industrial Production. Estimate 0.1%. Actual -0.4%
  • 6:00 US NFIB Small Business Index. Estimate 94.6. Actual 94.9
  • 10:00 British NIESR GDP Estimate. Actual 0.4%.
  • 10:00 US JOLTS Jobs Openings. Estimate 5.67M. Actual 5.49M
  • All Day – US Presidential Election
  • All Day – Congressional Elections

*All release times are EDT

* Key events are in bold

GBP/USD for Tuesday, November 8, 2016

GBP/USD November 8 at 11:00 EDT

Open: 1.2396 High: 1.2439 Low: 1.2361 Close: 1.2370

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2120 1.2272 1.2351 1.2479 1.2620 1.2778
  • GBP/USD was flat in the Asian session. The pair posted slight gains in European trade but retracted. GBP/USD is showing little movement in the North American session
  • 1.2351 is a weak support line
  • There is resistance at 1.2479

Further levels in both directions:

  • Below: 1.2351, 1.2272 and 1.2120
  • Above: 1.2479, 1.2620 and 1.2778
  • Current range: 1.2351 to 1.2479

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Tuesday session. Currently, long positions command a majority (58%), 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.