GBP/USD weakened in Wednesday trading after some disappointing British releases. The pair dipped below the 1.51 level, and continues to test this line early in the North American session. In the US, Pending Home Sales looked weak, failing to reach the market estimate.
The pound lost ground as the UK posted a string of dismal readings. Current Account, this week’s major UK release, saw the deficit widen to GBP14 billion, well above the estimate of GBP12.8 billion. Final GBP was also weak, posting its fourth decline in five readings. The indicator declined 0.3%, matching the estimate. This was a sharp drop from the solid 0.9% gain in February. BBA Mortgage Approvals also disappointed, falling below expectations for the fourth consecutive release. The important housing indicator dropped to 30.5 thousand, way off the estimate of 33.6 thousand. CBI Realized Sales fell sharply from 8 points last month to zero, surprising the markets which had anticipated a reading of 12 points. In the US. Pending Home Sales declined 0.4%, missing the estimate of -0.3%. This weak release comes on the heels of another disappointing housing indicator as New Home Sales came in well below the forecast on Tuesday.
Last week’s crisis over the Cyprus bailout agreement reached a fever pitch, and there was even talk that the island country might exit the Eurozone if the ECB carried out its threat to cut off emergency funds. Although a new bailout agreement was reached on Monday, the lack of details has left the markets wary. With a lingering fear of a bank run in Cyprus, all banks throughout the country will remain closed until Thursday. The size of the haircut imposed on accounts larger than 100,000 euros is still not clear. The euro responded to the new bailout by plunging about 150 points on Monday, and has now dropped below the 1.27 level. Meanwhile, the head of the Eurogroup, Dutch finance minister Jeroen Dijsselbloem, stated that the Cyprus deal could serve as a template for future bank restructurings in the Eurozone. Dijsselbloem later backtracked on these comments, but his ill-timed remarks have likely made holders of large deposits in other zone countries even more jittery.
With recent US numbers pointing upwards, there has been a lot of talk of the US recovery deepening. However, Tuesday’s major releases point to continued weakness in housing, consumer confidence and manufacturing. Core Durable Goods Orders posted its first decline since last September, dropping 0.5%. The markets had expected a 0.7% gain. CB Consumer Confidence failed to repeat February’s excellent numbers, dropping from 69.6 points to 59.7 points, way below the estimate of 67.9 points. New Home Sales also declined, coming in at 411 thousand, well of the forecast of 426 thousand. The US will have to produce better data from its key releases to convince the markets that the recovery is deepening and that the economy is indeed headed in the right direction.
GBP/USD for Wednesday, March 27, 2013
1.5116 H: 1.5181 L: 1.5094
The pound has lost ground in Wednesday trading, as the pair trades slightly above the 1.51 level. The pair is facing resistance at 1.5138. This weak line could see further activity if the downward trend reverses. There is stronger resistance at 1.5203. On the downside, there is support at 1.5053. This line is protecting the all-important 1.50 level. The next support line is at 1.4988.
Wednesday’s weak releases hurt the sliding pound, which has now lost over one cent so far this week. Will the downward momentum continue? We could see the pair continue to float close to the 1.51 line. The US releases Unemployment Claims on Thursday, and this market-mover could impact on the direction of GBP/USD.
- Current range: 1.5053 to 1.5138
Further levels in both directions:
- Below: 1.5053, 1.4988, 1.4880 and 1.4818
- Above: 1.5138, 1.5203, 1.5309, 1.5392 and 1.5461
OANDA’s Open Positions Ratios
The GBP/USD ratio continues to be comprised mostly of long positions, indicating a bias towards the pound improving against the US dollar. We are not seeing this reflected in the current movement of the pair, as GBP/USD has weakened in Wednesday trading.
The pound is having a tough time this week against the greenback, and the British currency received no help from a string of weak releases on Wednesday. We can expect the pound to remain under pressure, and GBP/USD could dip into 1.50 territory.
- 9:3o British Current Account. Estimate -12.8B. Actual -14.0B
- 9:30 British Final GDP. Estimate -0.3%. Actual -0.3%
- 9:30 British Revised Business Investment. Estimate -1.2%. Actual -0.8%
- 14:00 US Pending Home Sales. Estimate -0.3%. Actual -0.4%
- 14:30 US Crude Oil Inventories. Estimate 1.5M. Actual 3.3M
- 15:00 US FOMC Member Charles Evans Speaks
- 15:30 US FOMC Member Eric Rosengren Speaks
*Key releases are highlighted in bold
*All release times are GMT