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GBP/USD – Pound Advances on Solid UK Manufacturing Numbers

The British pound has posted gains on Tuesday, taking advantage of strong British Manufacturing data. GBP/USD was trading just above the 1.53 line early in the North American session. In other British releases, Trade Balance missed its estimate, and NIESR GDP Estimate posted a modest gain.

There were a host of British releases today, with all eyes on Manufacturing Production. Last week, Manufacturing PMI was below the estimate, and this sent the pound on a tailspin. The news was much better this time around, as the key indicator shot up 0.8%, bouncing back from a very poor reading of 1.5% last month. The trade deficit widened from GBP 8.2 billion to GBP9.4 billion. This was much higher than the estimate of a deficit of GBP8.7 billion. The NIESR GDP Estimate, which tracks the quarterly GDP on a monthly basis, posted a weak gain of 0.1%. In the US, the NFIB Small Business Index came in at 89.5 points, missing the estimate of 92.3 points. Wholesale Inventories declined 0.3%, surprising the markets which had expected a gain of 0.5%.

The markets are following events in Portugal, where the country’s Constitutional Court struck down parts of an austerity package that the government announced earlier this year. These steps are part of a bailout package that Portugal received in 2011. The court struck down tax hikes worth about EUR5 billion euros. As a result, Portugal finds itself EUR 1.4 billion short in expected revenue. The economic picture is not good, as the economy shrunk 3.2% in 2012, and Portugal is behind in its deficit reduction targets. The legal tangles could aggravate the country’s difficult economic situation and lead to a full-blown crisis, which would be bad news for the Eurozone and the euro.

In the US, talk of a deepening recovery is being replaced by concerns about the direction the economy, as the US continues to post out dismal numbers. With every major release over the past two weeks failing to meet expectations, the markets are justifiably becoming increasingly anxious. The data comes from sectors throughout the economy – housing, manufacturing consumer confidence and employment releases have all missed their estimates. On Friday, Non-Farm Payrolls followed the string of dismal releases, posting its worst showing since July 2012. There were 88 thousand new jobs created, way below the estimate of 198 thousand. Will we see a turnaround in this week’s numbers? If not, we could see some volatility in the currency markets.

 

GBP/USD for Tuesday, April 9, 2013

Forex Rate Graph 15/1/13

GBP/USD April 9 at 15:00 GMT

1.5290 H: 1.5325 L: 1.5250

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5053 1.5138 1.5203 1.5309 1.5392 1.5461

 

The pound has moved higher in Tuesday trading. The pair is facing resistance at 1.5309. This line was breached earlier today, and could face more pressure from the pair. There is stronger resistance at 1.5392. On the downside, 1.5203 is providing support. This line has strengthened as the pair trades close to the 1.53 level. The next support level can be found at 1.5138.

 

Further levels in both directions:

 

 

OANDA’s Open Positions Ratios

The GBP/USD ratio is pointing to movement towards long positions. This is consistent with what we are seeing from the pair, as the British pound has moved higher against the dollar. Long positions enjoy a substantial majority in the ratio, indicating a strong bias in favor of the pound continuing to push higher.

The pound has taken advantage of solid manufacturing data out of the UK and has posted gains on Tuesday against the US dollar. There are no major economic releases out of the US until late in the week, so in the meantime we can expect the pound to maintain it recent gains against the US currency.

 

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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