GBP/USD – Pound Edges Lower, BoE Apprehensive About Trump

GBP/USD has edged lower in the Wednesday session. In North American trade, the pair is trading at 1.2460. On the release front, the BoE released its Financial Stability report, with the bank noting concerns over expected higher interest rates in the US and fallout from Brexit. The BOE also release its stress test for the country’s major banks. The Royal Bank of Scotland (RBS) failed the test, but has already approved a new capital plan submitted by RBS.

In the US, ADP Nonfarm Employment Change jumped to 216 thousand, well above the forecast of 161 thousand. On Thursday, the UK will publish Manufacturing PMI, while the US releases unemployment claims and the ISM Manufacturing PMI.

The Bank of England released its Financial Stability report, with the bank warning that the financial sector faces a challenging environment. The bank expressed its uneasiness over Donald Trump’s election as US president. The report said that “[t]he US election has reinforced existing vulnerabilities,”, such as a weak global economy and the high levels of debt affecting emerging market economies. Trump has said he will increase infrastructure spending and cut taxes, and the BoE is worried that this could lead to higher global inflation. In a follow-up press conference, BoE Governor Mark Carney said that Trump’s protectionist declarations could throw “sand in the gears” of the global economy and have adverse repercussions on the UK economy. The report also noted a warning about fallout from Brexit, saying it was essential that an “orderly transition” take place when Britain leaves the European Union.

US indicators impressed on Tuesday. Preliminary GDP sparkled in the third quarter, as the economy expanded 3.2%, above the forecast of 3.0%. The 3.2% gain was an upwards revision of Advance GDP, which came in at 2.9%. Solid consumer confidence numbers have been a critical factor in the US recovery, as an optimistic consumer is likely to go out and spend money. CB Consumer Confidence jumped to 107.1 points in November, surpassing the 100-level for the third time in four months. Last week, UoM Consumer Sentiment jumped to 93.8 points, its highest level since May. Donald Trump’s surprise election victory has not had an adverse effect on consumer confidence, and if these rosy numbers translate into stronger consumer spending, the US dollar could continue to climb against its rivals.

US Q3 GDP Revised Upward on Consumer Spending

GBP/USD Fundamentals

Wednesday (November 30)

  • All Day – OPEC Meetings
  • 2:00 UK Bank Stress Test Results
  • 2:00 BoE Financial Stability Report
  • 2:00 BoE FPC Statement
  • 8:15 US ADP Nonfarm Employment Change. Estimate 161K. Actual 216K
  • 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%
  • 8:30 US Personal Spending. Estimate 0.5%. Actual 0.3%
  • 8:30 US Personal Income. Estimate 0.4%. Actual 0.6%
  • 9:45 US Chicago PMI. Estimate 52.1. Actual 57.6
  • 10:00 US Pending Home Sales. Estimate 0.3%. Actual 0.1%
  • 10:30 US Crude Oil Inventories. Estimate 0.7M. Actual -0.9M
  • 11:45 US FOMC Member Jerome Powell Speech
  • 14:00 US Beige Book

Upcoming Key Events

Thursday (December 1)

  • 4:30 British Manufacturing PMI. Estimate 54.4
  • 8:30 US Unemployment Claims. Estimate 252K
  • 10:00 US ISM Manufacturing PMI. Estimate 52.1

*All release times are EST

* Key events are in bold

GBP/USD for Wednesday, November 30, 2016

GBP/USD November 30 at 10:05 EST

Open: 1.2489 High: 1.2515 Low: 1.2413 Close: 1.2455

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2120 1.2272 1.2351 1.2471 1.2620 1.2778
  • GBP/USD was flat in the Asian session and showed choppiness in European trade. Early in the North American session, the pair has posted slight gains
  • 1.2351 is providing support
  • 1.2471 remains busy and has switched to a resistance role. It is a weak line

Further levels in both directions:

  • Below: 1.2351, 1.2272 and 1.2120
  • Above: 1.2471, 1.2620, 1.2778 and 1.2849
  • Current range: 1.2351 to 1.2471

OANDA’s Open Positions Ratio

GBP/USD ratio remains unchanged this week. Currently, long positions have a majority (61%), indicative of trader bias towards GBP/USD reversing directions and gaining 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.