The British pound pushed higher, and has gained over a cent against the US dollar in Wednesday trading. USD/GDP was trading in the high-1.51 range. The pound took advantage of a mostly positive US manufacturing and housing data. In the UK, the data was not as rosy, as British GDP and Preliminary Investment both posted declines. The markets continue to be preoccupied with the political crisis in Italy, after Italian parliamentary elections concluded with no clear winner. There are fears of a protracted political deadlock in Italy, or even the possibility of new elections, neither option being particularly palatable to the markets.
The results of this week’s parliamentary election in Italy shocked the country, and rattled markets in the Eurozone and beyond. The 5-Star Movement, which was largely a protest movement that was dubbed a “non-party”, managed to win more votes than any other single party. The Center-left bloc, headed by Pier Luigi Bersani, will have a majority in the lower house of parliament, but there is a stalemate in the Senate. This leaves the country in a political deadlock, as a workable government requires a majority in both houses. Prime Minister Monti’s party fared poorly at the polls, reflecting widespread dissatisfaction with Monti’s tough austerity measures. While Italian politicians scramble to sort out the election puzzle, Eurozone officials are clearly worried, as they try to put on a brave face on what has become the bloc’s latest crisis. German Foreign Minister Guido Westerwelle urged Italy to form a government as quickly as possible. Westerwelle noted that the entire Eurozone was “in the same boat” with regard to the debt crisis. French Finance Minister Pierre Moscovici stated that the results did not threaten stability in the Eurozone, but at the same time, it was essential that Italy gets its act together and form a new government. However, Spain’s foreign minister, Jose Garcia-Margallo did not hide his pessimism, warning that the election results could have negative consequences for both Italy and the Eurozone.
Economic releases out of the US and the UK continue to point to economies headed in opposite directions. In the UK, Preliminary GDP for Q4 dipped into negative territory, declining by 0.3%. Although this matched the forecast, this weak figure underscores the lack of growth in the British economy. Preliminary Business Investment looked awful, posting a decline of 1.2%. This was nowhere near the estimate of a 2.2% gain. Meanwhile, in the US, Core Durable Goods Orders jumped 1.9%, crushing the estimate of 0.3%. Pending Home Sales bounced back nicely, gaining 4.5%. This easily beat the forecast of 1.7%. Durable Goods Orders was today’s fly in the ointment, dropping 5.2%. The estimate stood at -4.8%. The US numbers follow Tuesday’s strong readings, as Consumer Confidence and New Home Sales were very sharp. The markets, which have become accustomed to seeing mixed data out of the US for months, were very pleased with the string of impressive numbers.
GBP/USD for Wednesday, Feb 27, 2013
GBP/USD Feb 27 at 16:00 GMT
1.5144 H: 1.5188 L: 1.5081
The pound has rebounded, posting sharp gains against the US dollar in Wednesday trading. The pair is receiving weak support at 1.5138. Look for this line to see action as the GBP/USD continues to fluctuate. There is stronger support at 1.5053. This line is protecting the all-important 1.50 level. On the upside, 1.5303 is providing resistance. This is followed by resistance at 1.5309.
- Current range: 1.5138 to 1.5203
Further levels in both directions:
- Below: 1.5138, 1.5053, 1.4988, 1.4880 and 1.4818
- Above: 1.5203, 1.5309, 1.5395, 1.5481 and 1.5565
OANDA’s Open Positions Ratios
The GBP/USD ratio continues to point to movement towards long positions. This is consistent with what we are seeing from the pair, as the pound has posted strong gains against the US dollar in Wednesday trading. Trader sentiment remains strongly biased in favor of long positions, indicating an expectation for the pound to continue moving upward.
The pound has had a miserable February, but has finally showed some fight as it pushes higher against the US. Given the crisis in Italy, we could see the dollar rebound as nervous investors opt for the safe-haven greenback. Look for GBP/USD to continue to be volatile.
- 9:20 British MPC Member Charles Bean Speaks.
- 9:30 British Preliminary GDP. Estimate -03.%. Actual -0.3%.
- 9:30 British Preliminary Business Investment. Estimate 2.2%. Actual -1.2%.
- 9:30 British Index of Services. Estimate 0.1%. Actual -0.1%.
- 13:30 US Core Durable Goods Orders. Estimate 0.3%. Actual 1.9%.
- 13:30 US Durable Goods Orders. Estimate -4.8%. Actual -5.2%.
- 15:00 US Fed Chairman Bernard Bernanke Speaks. Bernanke will testify on the Semiannual Monetary Policy Report before the House Financial Services Committee.
- 15:00 US Pending Home Sales. Estimate 1.7%. Actual 4.5%.
- 15:30 US Crude Oil Inventories. Estimate 2.4M. Actual 1.1M.
*Key releases are highlighted in bold
*All release times are GMT
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