GBP/USD – Pound Slips as Dollar Strengthens on Tax Reform Hopes

The British has posted losses in the Wednesday session. In North American trade, GBP/USD is trading at 1.3109, down 0.44% on the day. On the release front, there are no major events out of the UK or the US. On Thursday, the UK releases NIESR GDP Estimate and the US will publish unemployment claims.

BoE Governor Mark Carney hasn’t shied away from public statements on Brexit, much to the angst of many lawmakers. Carney weighed in again on Brexit in a television interview on the weekend. Carney expressed concern at the lack of uncertainty over a final deal with the European Union, saying that the economy “should really be booming, but it’s just growing.” According to Carney, the BoE wants a scenario with a smooth transition out of the EU, with a trade deal that was somewhere in between full membership in a single market and a ‘no deal’ outcome. The BoE cut rates in August 2016, just after the Brexit vote. This reflected the Bank’s fear of a sharp downturn in the British economy, which did not occur. The BoE raised rates last week (for the first time since 2007), in what was widely viewed as a corrective measure to the August 2016 rate cut.

After failing to pass a new healthcare act, President Trump has his sights set on tax reform, a key item in his domestic platform. Trump wants Congress to pass legislation overhauling the tax code before the end of the year, but that could prove to be too tight of a deadline. Most Democrats have come out against the proposal, and not all Republicans are on board. The bill would cut corporate taxes from 35% to 20%, but predictably, Democrat and Republican lawmakers are at odds as to whether the bill will lower taxes for the middle class. The bill is presently being debated in a congressional committee and is expected to move to the House floor next week. The Senate will present its version of the bill on Thursday, so we can expect plenty of activity in Congress in the next few weeks. Expectations that Trump will cut taxes has been the catalyst for a stock market rally over the past year, and if the bill does become law, the US dollar will likely gain ground.

 

GBP/USD Fundamentals

Wednesday (November 8)

  • 10:30 US Crude Oil Inventories. Estimate -2.5M. Actual +2.2M
  • 13:01 US 10-year Bond Auction
  • 19:01 British RICS House Price Balance. Estimate 4%

Thursday (November 9)

  • 8:00 British NIESR GDP Estimate
  • 8:30 US Unemployment Claims. Estimate 232K

*All release times are GMT

*Key events are in bold

 

GBP/USD for Wednesday, November 8, 2017

GBP/USD November 8 at 12:05 EDT

Open: 1.3166 High: 1.3176 Low: 1.3087 Close: 1.3097

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2811 1.2904 1.3022 1.3122 1.3224 1.3347

GBP/USD was flat in the Asian session. The pair posted losses in the European session and is flat in North American trade

  • 1.3022 is providing support
  • 1.3122 has switched to a resistance role after losses by GBP/USD on Wednesday. It could be tested in the North American session

Further levels in both directions:

  • Below: 1.3022, 1.2904 and 1.2811
  • Above: 1.3122, 1.3224, 1.3347 and 1.3445
  • Current range: 1.3022 to 1.3122

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Wednesday session. Currently, long positions have a majority (55%), indicative of trader bias towards GBP/USD reversing directions 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.

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.