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GBP/USD – Pounds Slides Despite Solid UK Numbers

GBP/USD continues to show volatility in Tuesday trading. The pound is currently on a downward trend, and has dipped below the 1.57 line. In today’s releases, Services PMI pushed over the 50 point level ,and BRC Retail Sales had their best showing in a year. Yet, the positive numbers were not enough to aid the slumping British currency. In the US, the manufacturing sector continues to struggle, as Factory Orders fell well below the market estimate. The markets will be paying close attention to Tuesday’s key release, ISM Non-Manufacturing PMI.

British data looked solid today, in sharp contrast to the anemic pound. Services PMI improved to 51.5 points, easily beating the estimate of 49.8 points. A reading over the 50 level indicates expansion, so the release was certainly good news. BRC Retail Sales also looked sharp, climbing 1.9%. This was the sharpest rise by the consumer indicator since January 2012. Despite these strong numbers, the markets continue to be concerned about the lack of economic growth in the UK and the prognosis for 2013. The well-respected National Institute of Economic and Social Research (NIESR) found that the UK economy contracted by 0.3% in Q4 of 2012, and has downgraded its forecast for 2013. The institute says that the British economy will grow by just 0.7% in 2013, in contrast to its November estimate of 1.1%. The NIESR report added that a solid recovery will need stronger consumer spending and  corporate investment and an increase in exports.

The markets have fresh worries in Spain, as Spanish Prime Minister Mariano Rajoy finds himself in a complicated corruption case, and has accused of being involved in illegal transactions. Rajoy has denied any wrongdoing and has rejected calls to resign, but his party is losing public support and the issue could become a crisis for the government, which already has its hands full trying to keep the troubled economy afloat. The government is already deeply unpopular thanks to the worsening recession and staggering unemployment levels, and this latest political crisis could further undermine investor confidence. Spanish borrowing costs rose slightly following the news, as the markets nervously monitor the latest developments out of Madrid.

Care to hazard a guess where the US economy is headed? US economic numbers continues to keep the markets guessing about the extent of the US recovery. The recent GDP release was a major disappointment, as the economy contracted for the first time since 2009. Employment numbers lost their recent shine, as NFP and Unemployment Claims failed to meet expectations, and the unemployment rate inched up to 7.9%. On the bright side, consumer sentiment and manufacturing data have been solid. UoM Consumer Sentiment climbed to 73.8 points, well above the estimate. ISM Manufacturing PMI also was sharp, posting an eight-month high. With only a handful of key US releases this week, each one will find itself under the market microscope as the markets try to get a handle on the health of the US economy.


GBP/USD for Tuesday, February 5, 2013

Forex Rate Graph 5/2/13

GBP/USD February 5 at 15:30 GMT

1.5694 H: 1.5804 L: 1.5691


GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5568 1.5625 1.5685 1.5728 1.5785 1.5850


GBP/USD is fluctuating sharply and has dipped below the 1.57 line. On the downside, there is weak support at 1.5685. This line could see further activity if the pound continues its slide. The pair is receiving stronger support at 1.5625. The pair is facing weak resistance at 1.5728. This is followed by stronger resistance at 1.5785.

Current range: 1.5685 to 1.5728.

Further levels in both directions:


OANDA Open Positions Ratios

The GBP/USD ratio has shifted directions, and is now showing strong movement towards short positions. This is reflected in the pair’s current downward movement. With the continuing volatility in GBP/USD, we can expect further activity in the ratio as well.

GBP/USD continues to be very busy, and the pair is currently putting strong pressure on the 1.57 line. The markets continue to fret over the health of the British economy, and this negative sentiment is taking its toll on the pound, which continues to struggle against the US dollar.

GBP/USD Fundamentals


*Key releases are highlighted in bold

*All release times are GMT

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 [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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