GBP/USD – Pound Shrugs off Strong British GDP Report

GBP/USD has posted small losses on Wednesday. In the North American session, the pair is trading at 1.2470. In the UK, Second Estimate GDP improved with a gain of 0.7% in the first quarter, edging above the forecast of 0.6%. Preliminary Business Investment disappointed with a decline of 1.0%, short of the forecast of 0.0%. Finally, the Index of Services posted a gain of 0.8%, matching the estimate. In the US, Existing Housing Sales jumped to 5.69 million, easily beating the estimate of 5.55 million. Later in the day, the Federal Reserve will publish the minutes of the January policy meeting. On Thursday, the US releases unemployment claims, with an estimate of 242 thousand.

Bank of England officials were grilled on Tuesday over the central bank’s inflation report. Gertjan Vlieghe, a member of the Monetary Policy Committee, defended the central bank, saying that economic models can never be perfectly accurate. The BoE has come in for sharp criticism after overestimating the damage to the British economy after the Brexit vote in June. The economy has weathered Brexit quite well, but BoE Governor Mark Carney continues to warn that stormy waters lie ahead as Britain prepares to begin negotiations over the terms of its departure from the European Union. Inflation has climbed close to the BoE’s target of 2.0%, but Carney has maintained a neutral stance regarding future interest rate moves.

The Federal Reserve is back in the spotlight on Wednesday. The central bank finally pressed the rate trigger in December, a full year after the previous rate hike. Last week, Fed Chair Janet Yellen strongly hinted that that another hike is on the way, leaving the markets to speculate on the timing of a hike – will it be in March or June? Even though the US economy is solid and we could see several rate hikes in 2017, market uneasiness over the Trump administration continues to grow, dampening investor appetite for risk. Trump continues to have difficulty filling in key cabinet positions and the media continues to probe connections between Trump officials and Russia. Trump is yet to outline a clear and coherent economic policy, although he has promised to unveil a tax package in the next few weeks. After Trump’s shock win in November, post-election euphoria boosted the markets. However, Trump’s first month in office has been marked by controversy and confusion, which has unsettled the markets.

 

GBP/USD Fundamentals

Wednesday (February 22)

  • 4:30 British Second Estimate GDP. Estimate 0.6%. Actual 0.7%
  • 4:30 British Preliminary Business Investment. Estimate 0.0%. Actual -1.0%
  • 4:30 British Index of Services. Estimate 0.8%. Actual 0.8%
  • 6:00 MPC Member Jon Cunliffe Speech
  • 10:00 US Existing Home Sales. Estimate 5.55M
  • 13:00 US FOMC Member Jerome Powell Speech
  • 14:00 US FOMC Meeting Minutes

Thursday (February 23)

  • 8:30 US Unemployment Claims. Estimate 242K

*All release times are GMT

*Key events are in bold

 

GBP/USD for Wednesday, February 22, 2017

GBP/USD February 22 at 10:15 EST

Open: 1.2486 High: 1.2508 Low: 1.2422 Close: 1.2464

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2143 1.2272 1.2351 1.2471 1.2579 1.2674
  • GBP/USD posted small gains in the Asian session. The pair reversed directions in the European session but has partially recovered in North American trade
  • 1.2351 is providing support
  • 1.2471 remains fluid. Currently it is a weak resistance line

Further levels in both directions:

  • Below: 1.2351, 1.2272 and 1.2143
  • Above: 1.2471, 1.2579, 1.2674 and 1.2775
  • Current range: 1.2351 to 1.2471

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged this week. Currently, long positions have 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.