GBP/USD – Pound Dips Despite Solid British GDP

After considerable gains this week, GBP/USD has lost ground in the Thursday session. In North American trade, the pair is trading at 1.2570. On the release front, it’s a busy day. British Preliminary GDP gained 0.6%, edging above the forecast of 0.5%.  CBI Realized Sales surprised the markets with a surge of 28 points, compared the forecast of -8 points. Over in the US, unemployment claims jumped to 259 thousand, well above the forecast of 247 thousand. New Home Sales also disappointed, dropping to 536 thousand. This was much lower than the estimate of 585 thousand.

The British economy continues to expand, much to the surprise of many pundits who predicted that the economy would tailspin after the Brexit vote in June. Preliminary GDP beat the estimate, posting a strong gain of 0.6% in the fourth quarter of 2016. At the same time, negotiations with the European Union have not yet started, and even staunch Brexit supporters would be hard pressed to argue that the economy will not take a hit when Britain leaves the continental club, at least in the short term. On Friday, Prime Minister May will meet President Trump in Washington, the first foreign leader to meet the new president. Trump has spoken glowingly about the Britain’s decision to leave the EU, and May could use Trump’s admiration and support to her advantage, in the form of a free-trade deal with the US. May will have to navigate through rough waters when she negotiates the terms of Brexit with the Europeans, and a brand new trade agreement with the powerful US will demonstrate to her opponents, both domestically and in Europe, that Britain can “go it alone” without the EU.

GBP. Brexit Hits a Speed Br-ump

Brexit Sceptics Win Battle But Will Lose the War

UK PM May to Publish ‘White Paper’ Setting Out Brexit Plan

GBP/USD Fundamentals

Thursday (January 26)

  • 4:30 British Preliminary GDP. Estimate 0.5%. Actual 0.6%
  • 4:30 British BBA Mortgage Approvals. Estimate 41.1K. Actual 43.2K
  • 4:30 British Index of Services. Estimate 0.9%. Actual 1.0%
  • 6:00 British CBI Realized Sales. Estimate +28. Actual -8
  • 8:30 US Unemployment Claims. Estimate 247K. Actual 259K
  • 8:30 US Goods Trade Balance. Estimate -64.5B. Actual -65.0B
  • 8:30 US Preliminary Wholesale Inventories. Estimate 0.9%. Actual 1.0%
  • 9:45 US Flash Services PMI. Estimate 54.4. Actual 55.1
  • 10:00 US New Home Sales. Estimate 585K. Actual 536K 
  • 10:00 US CB Leading Index. Estimate 0.5%. Actual 0.5%
  • 10:30 US Natural Gas Storage. Estimate -121B. Actual -119B

Upcoming Key Releases

Friday (January 27)

  • 8:30 US Advance GDP. Estimate 2.1%
  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 10:00 Revised UoM Consumer Sentiment. Estimate 98.2

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, January 26, 2017

GBP/USD January 26 at 10:40 EST

Open: 1.2634 High: 1.2673 Low: 1.2552 Close: 1.2589

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2351 1.2471 1.2579 1.2674 1.2775 1.2849
  • GBP/USD was flat in the Asian session. The pair posted losses in the European session but is flat in North American trade
  • 1.2579 was tested in support earlier. It could break in the North American session
  • 1.2674 is the next resistance line

Further levels in both directions:

  • Below: 1.2579, 1.2471, 1.2351 and 1.2272
  • Above: 1.2674, 1.2775 and 1.2849
  • Current range: 1.2579 to 1.2674

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement in the Thursday session. Currently, long positions command a majority (57%), indicative of trader bias towards GBP/USD reversing directions and moving 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.

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.