GBP/USD – Pound Higher as US Manufacturing, Job Numbers Disappoint

GBP/USD has posted gains on Thursday, erasing most of the losses which marked the Wednesday session. In North American trade, GBP/USD is trading at 1.2830. There are no British economic releases on the schedule, although the markets are keeping an eye on BoE Governor Mark Carney, who will speak at two events in Washington. In the US, manufacturing and employment numbers were soft, as the Philly Fed Manufacturing Index and unemployment claims missed their estimates. Later in the day, US Treasury Secretary Robert Mnuchin will deliver remarks in Washington. On Friday, the UK releases Retail Sales, which is expected to decline 0.3%. The US will publish Existing Home Sales, with a forecast of 5.61 million.

It’s been a great week for the pound, as GBP/USD has jumped 2.4 percent. On Tuesday, the currency punched above 1.29, its highest level since October 2016, on the news that Prime Minister May had called a snap national election on June 8. The announcement caught the markets by surprise, as the government’s term runs until 2020 and May had previously said that she would not call early elections. May’s Conservative Party currently has 330 seats in Parliament, which is a slim majority of just 17 seats. If, as current opinion polls predict, the  government wins a larger majority, this would likely propel the pound to higher levels.

With the US economy continuing to perform well, the markets are expecting the Fed to continue to gradually raise rates in 2017. The Fed has broadly hinted that it plans two more rate hikes this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March are likely to make the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. The odds of a June hike have slipped to 46% according to the CME Group, down sharply from 65% in early April.

GBP/USD Fundamentals

Thursday (April 20)

• 8:30 US Philly Fed Manufacturing Index. Estimate 25.6. Actual 22.0
• 8:30 US Unemployment Claims. Estimate 241K. Actual 244K
• 11:30 BoE Governor Mark Carney Speech
• 11:30 BoE Governor Mark Carney Speech
• 13:15 US Treasury Secretary Steven Mnuchin Speech

Friday (April 21)

• 4:30 British Retail Sales. Estimate -0.3%

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, April 20, 2017

GBP/USD April 20 at 11:50 EST

Open: 1.2781 High: 1.2847 Low: 1.2772 Close: 1.2835

GBP/USD Technical

• GBP/USD edged higher in the Asian session. The pair was flat in the European session and has posted slight gains in North American trade
• 1.2706 has strengthened in support
• 1.2865 is a weak resistance line

Further levels in both directions:

• Below: 1.2706, 1.2571 and 1.2471
• Above: 1.2865, 1.2946 and 1.3058
• Current range: 1.2706 to 1.2865

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Thursday session. Currently, short positions have a majority (58%). This is indicative of trader bias towards GBP/USD reversing directions and moving downwards.

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.