Pound Starts Week Higher, UK Manufacturing Production Next

The British pound has posted gains in the Monday session. In North American trade, GBP/USD is trading at 1.3134, up 0.46% on the day. In the US, banks are closed for Columbus Day and there are no US events on the schedule. Later in the day, the UK releases the sole event of the day, BRC Retail Sales Monitor. On Tuesday, the UK will publish Manufacturing Production, which is expected to slow to 0.3%.

The pound suffered its worst weekly decline of 2017, as GBP/USD slumped 2.4% last week. On Friday, the pound dropped to 1.3027, its lowest level since September 7. Investors remain worried about the political longevity of Prime Minister Theresa May. There were no broadsides fired at May at the Conservative party convention last week, but she still remains vulnerable to being ousted. Meanwhile, it’s back to Brexit this week, as British and European negotiators meet in Brussels. The sides are scheduled to discuss Britain’s financial settlement, one of the key sticking points between the parties. Britain is keen to discuss trade talks, but the Europeans have insisted that progress first be made on a  number of issues, such as the size of Britain’s bill for leaving the European Union.

Non Farm Employment Change wiped out 33 thousand jobs in September, much weaker than the estimate of a gain of 85 thousand. However, the weak reading didn’t cause any alarm in the markets, but rather underscored the severe impact of Hurricanes Harvey and Irma, which hit the US in late August and early September. The two storms caused $150-200 billion in damage and also took a toll on the employment market, although the labor market is expected to rebound as the recovery effort intensifies. On a brighter note, wage growth accelerated to 0.5%, above the estimate of 0.3%. This reading is pointing to stronger inflationary pressure, although we’ll have to wait for additional inflation indicators, such as CPI, to gauge inflation is moving higher. There was more good news from September job data, as the unemployment rate fell from to 4.2% in September, down from 4.4% a month earlier.

GBP/USD Fundamentals

Monday (October 9)

• 19:01 British BRC Retail Monitor

Tuesday (October 10)

• 4:30 British Manufacturing Production. Estimate 0.3%
• 4:30 British Goods Trade Balance. Estimate -11.2B
• 4:30 British Construction Output. Estimate 0.1%
• 4:30 British Industrial Production. Estimate 0.2%
• 8:00 British NIESR GDP Estimate

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, October 9, 2017

GBP/USD October 9 at 11:55 EDT

Open: 1.3069 High: 1.3185 Low: 1.3069 Close: 1.3130

GBP/USD Technical

GBP/USD inched higher in the Asian session. The pair posted gains in the European session and has retracted in North American trade

• 1.3121 has switched to support following gains from GBP/USD on Monday
• 1.3224 is the next resistance line

Further levels in both directions:

• Below: 1.3121, 1.3022 and 1.2904
• Above: 1.3224, 1.3347, 1.3444 and 1.3514
• Current range: 1.3121 to 1.3224

OANDA’s Open Positions Ratio

GBP/USD ratio showed strong movement towards long positions late last week, as the GBP/USD headed lower. Currently, short and long positions are evenly split, indicative of a lack of trader bias as to what direction GBP/USD will take 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.