GBP/USD – Pound Dips as Manufacturing PMI Misses Expectations

GBP/USD has posted slight losses in the Monday session. In the North American trade, GBP/USD is trading at the 1.25 level. On the release front, British Manufacturing PMI improved to 54.2, but this fell short of the forecast of 55.1 points. In the US, ISM Manufacturing PMI dropped to 57.2, matching the forecast. On Tuesday, the UK releases Construction PMI.

Britain has entered Phase II of the Brexit saga, as Prime Minister Theresa May gave formal notice its intent to leave the EU last week. The negotiations over the breakup are supposed to be conducted over a two-year period, and promise to be tough and perhaps acrimonious. The EU has no intention of giving Britain a better deal than it had within the club, and wants the first item of business to be “exit bill”  for Britain’s share of debts, pensions and other payments. The EU says the amount in demand could be as high as EUR 60 billion, but the UK government is likely to balk at the bill. For its part, the British government needs to show the British public that it has reached a good deal,and has threatened to leave the EU without a deal if the EU is intransigent in the negotiations. That scenario, labeled “hard Brexit”, would likely take a toll on the British economy and could send the pound downward. Negotiations are unlikely to commence for several months, but we’re likely to have plenty of tough talk between the parties in the meantime.

Donald Trump’s young presidency has been turbulent. The battles with the media continue, an economic policy remains a mystery, and Trump suffered a major setback as he couldn’t even muster a vote over his healthcare bill. Despite these hiccups, the US economy hasn’t missed a beat in 2017. The CB consumer confidence report soared to 125.6 in March, and strong consumer confidence levels should translate into increased consumer spending. GDP for the fourth quarter was revised to 2.1%, up from 1.9% in the previous GDP report. This points to strong growth for the economy, as the discussions around the monetary policy tables are not whether the Fed will raise rates, but will it press the rate trigger twice or three times in 2017. The Fed will release the minutes of its March meeting on Wednesday, and the markets will be looking for clues as to the timing of a possible rate hike.

GBP/USD Fundamentals

Monday (April 3)

• 4:30 British Manufacturing PMI. Estimate 55.1. Actual 54.2
• 9:45 US Final Manufacturing PMI. Estimate 53.5. Actual 53.3
• 10:00 US ISM Manufacturing PMI. Estimate 57.2. Actual 57.2
• 10:00 US Construction Spending. Estimate 1.0%. Actual 0.8%
• 10:00 US ISM Manufacturing Prices. Estimate 68.5. Actual 70.5
• 10:30 US FOMC Member Esther Dudley Speech
• All Day – US Total Vehicles Sales. Estimate 17.4M
• 15:00 US FOMC Member Patrick Harker Speech

Tuesday (April 4)

• 4:30 British Construction PMI. Estimate 52.5

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, April 3, 2017

GBP/USD April 3 at 10:40 EST

Open: 1.2539 High: 1.2554 Low: 1.2478 Close: 1.2500

GBP/USD Technical

• GBP/USD showed little movement in the Asian session and recorded losses in European trade. The pair is steady in North American trade
• 1.2471 is weak support level
• 1.2571 is the next resistance line

Further levels in both directions:

• Below: 1.2471, 1.2351, 1.2272 and 1.2154
• Above: 1.2571, 1.2706 and 1.2865
• Current range: 1.2471 to 1.2571

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement at the start of the week. Currently, long positions and short positions are evenly split, indicative of a lack of trader bias as to what direction the pair takes next.

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.