GBP/USD – Pound Climbs Higher, US Unemployment Claims Drops

GBP/USD has recorded considerable gains on Thursday. In the North American session, the pair is trading slightly below the 1.2470. On the release front, US unemployment claims dropped to 254 thousand, beating the estimate of 267 thousand. There are no major British events on the schedule. On Friday, the US will release UoM Consumer Sentiment. The indicator is expected to edge lower to 87.4 points.

The markets haven’t seen anything like it since the Brexit vote in June. The turmoil seen across equity and currency markets was triggered by the unexpected election victory of Donald Trump. In a tumultuous Wednesday session, the dollar displayed a whipshaw movement against its major rivals. The pound was no exception, as GBP/USD posted sharp gains before surrendering most of these gains. Hillary Clinton was widely expected to cruise to the White House, with almost all pundits confidently predicting that Trump had no chance of winning. Trump’s election victory, which has already been labeled the most stunning win in US election history, sent shock waves across global markets. As the dust begins to settle after the election, it is already apparent that global markets were poorly positioned heading into the vote, overconfident that voters would reject Trump and hand Clinton a victory.

The Trump election victory also shook up the odds of a December rate hike by the Federal Reserve. The odds dropped as low as 40 percent earlier in the day, but recovered and surged to 76 percent. Currently, the odds are back at 71 percent, the same level they were at just before the election. Despite this recent volatility, it’s looking quite positive for a rate hike, which would mark the first rate move by the Fed since last December. Meanwhile, the markets will be watching to see if Fed chair Janet Yellen can work with President-elect Trump. During the election campaign, Trump harshly criticized Yellen, saying she was “too political”. If Yellen were to choose to resign, the shock waves will be sure to affect the US dollar.

The British economy has been steady in the third quarter, as key indicators continue to exceed market expectations. This has been especially impressive, following the Brexit referendum vote in late June. There were dire warnings about economic fallout from the June Brexit vote, but the harm to the economy was not nearly as severe as many analysts expected. On Tuesday, Manufacturing Production, a key event, gained 0.6% in September. This marked its best gain since April. 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.

GBP/USD Fundamentals

Thursday (November 10)

• 8:30 US Unemployment Claims. Estimate 267K. Actual 254K
• 9:15 US FOMC Member James Bullard Speaks
• 19:30 US Natural Gas Storage. Estimate 53B. Actual 54B
• 13:01 US 30-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -81.9B

Friday (November 11)

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 87.4

*All release times are EDT

* Key events are in bold

GBP/USD for Thursday, November 10, 2016

GBP/USD November 10 at 11:10 EDT

Open: 1.2417 High: 1.2499 Low: 1.2376 Close: 1.2476

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair was choppy in European session and has posted sharp gains in North American trade
• 1.2351 is providing support
• 1.2479 was tested in resistance earlier and is a fluid line

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 showing limited movement in the Thursday session. Currently, long positions command a majority (63%), indicative of trader bias towards GBP/USD continuing to move 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.