GBP/USD – Pound Steady as US Jobless Claims Sparkles

GBP/USD is showing little movement in the Thursday session. In North American trade, GBP/USD is trading at 1.2480. On the release front, there are no major British indicators. In the US, unemployment claims dropped sharply to 234 thousand, easily beating the forecast of 251 thousand. On Friday, the UK publishes Manufacturing Production. Across the pond, US job numbers will be in focus, with the release of three key indicators – Nonfarm Employment Change, Average Hourly Earnings and the unemployment rate.

Although the Bank of England proved to be overly pessimistic about the Brexit vote back in June, policymakers continue to sound the alarm about the negative impact that Brexit will have on the British economy. On Wednesday, Gertjan Vlieghe, a member of the BoE Monetary Policy Committee, warned that that consumer spending in the UK was weakening and the situation was likely to worsen. Vlieghe weighed in on the discussion over monetary policy, as he cautioned the BoE against raising interest rates. The BoE, which has adapted a neutral stance towards a rate move, is not expected to raise rates before 2018, and lengthy Brexit negotiations could delay a rate hike even further. Although inflation levels have moved higher, wage growth and consumer spending remain soft, so there isn’t much pressure on the BoE to raise rates in the near future.

The Federal Reserve released the minutes of its March policy meeting on Wednesday. At that meeting, the Fed raised rates a quarter-point to 0.75%, but the dovish rate statement disappointed the markets, triggering broad losses for the US dollar. In the minutes, policymakers noted upside risk to the US economy, but remained divided on whether inflation will rise to the Fed target of 2.0%. Most policymakers were in favor of taking steps to trim the $4.5 trillion balance sheet, which has ballooned since the Fed implemented its aggressive quantitative easing program back in 2008. So what’s next for the Fed? According to the CME’s Fed Watch, the odds of a rate hike at the May meeting are just 5 percent, while the likelihood of a rate hike in June stand at 63 percent. Fed policymakers appear divided on how many more times the Fed will press the rate trigger. Last week, FOMC member Eric Rosengren called for three more hikes, saying the Fed should raise rates in June, September and December. Rosengren said that employment and inflation levels were close to the Fed’s targets, and that three additional hikes were needed in order to prevent the US economy from overheating. However, a majority of FOMC members are in favor of just two more hikes this year.

GBP/USD Fundamentals

Thursday (April 6)

• 4:30 British Housing Equity Withdrawal. Estimate -9.5B. Actual 10.2B
• 7:30 US Challenger Job Cuts. Actual -2.0%
• 8:30 US Unemployment Claims. Actual 251K. Actual 234K
• 10:30 US Natural Gas Storage. Estimate 10B. Actual 2B

Friday (April 7)

• 4:30 British Manufacturing Production. Estimate 0.3%
• 5:00 BoE Governor Mark Carney Speech
• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 174K
• 8:30 US Unemployment Rate. Estimate 4.7%

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, April 6, 2017

GBP/USD April 6 at 12:10 EST

Open: 1.2486 High: 1.2506 Low: 1.2445 Close: 1.2482

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair edged higher in European trade but has retracted in the North American session
• 1.2471 was tested in support earlier. It is a weak line
• 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 has shown little movement this week. Currently, short positions have a slim majority (52%), indicative of slight trade bias towards GBP/USD breaking out and moving higher.

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.