GBP/USD continues to point upwards, and crossed the 1.55 line in Monday’s Asian session. The pound has jumped close to three cents against the US dollar in the past week. The British currency got a needed lift from a better than expected British GDP on Thursday, and took advantage as the US failed to follow suit on Friday, as US GDP fell below market expectations. The US started the week on the right foot, as Pending House Sales beat the forecast. The lone UK release is GfK Consumer Confidence. This indicator has been mired deep in negative territory, indicating very weak consumer confidence in the British economy. No significant change is expected in the upcoming release.
After weeks of a political deadlock, Italy has finally formed a government. The impasse, which had paralyzed the Eurozone’s third largest economy and had kept the markets jittery, was broken as Enrico Letta was nominated as prime minister last week. Letta’s Democratic Party does not have a parliamentary majority, so the coalition he has cobbled together may not last for long. Letta is considered a moderate and is liked within the Eurozone. The new government will be faced with an economy mired in recession and a sour electorate that is fed up with austerity measures. However, the markets were pleased that there is finally a government in place.
Will we see a rate cut from the ECB later this week? The Eurozone continues to stagnate with poor releases, and has its hands full with crises in Cyprus (bailout fiasco) and Italy (political gridlock). Speculation that the ECB will take action is growing. Goldman Sachs released a statement on Thursday, stating that it expects a 0.25% cut when the ECB meets this week. The prestigious firm also downgraded Eurozone growth for 2013, from -0.5% to -0.7%. The ECB will set rates on Thursday, but the possibility of a rate cut will likely to preoccupy the markets during the course of the week.
There was finally some good news out of the US, as Pending Home Sales beat expectations. The key housing indicator bounced back from a decline last week, and posted a gain of 1.5%. The estimate stood at 1.1%. The markets were pleased, especially following the disappointing US GDP on Friday. With a long string of weak releases for the past month, the GDP reading appeared to underscore the recent disappointing data. The key indicator improved sharply, climbing from -0.1% to 2.5%. However, the markets had anticipated a gain of 3.1%. The weaker than expected reading from one of the most important economic indicators should serve as a wakeup call that the US economy is hitting turbulence, which could affect the US dollar.
GBP/USD for Monday, April 29, 2013
GBP/USD April 29 at 14:45 GMT
1.5505 H: 1.5546 L: 1.5479
The pound continues to push upwards against the struggling US dollar and has move above the 1.55 line. The pair is facing weak resistance at 1.5524. We could see this line fall if the pound continues to move higher. There is stronger resistance at 1.5630. On the downside, 1.5432 is providing support. This line has strengthened as the pair trades at higher levels. The next support line is 1.5309, protecting the 1.53 level.
- Current range: 1.5432 to 1.5524
Further levels in both directions:
- Below: 1.5432, 1.5309, 1.5203 and 1.5138
- Above: 1.5524, 1.5630, 1.5695 and 1.5773
OANDA’s Open Positions Ratios
The GBP/USD ratio is starting the week with an increase in short positions. This is not reflected in the current movement of the pair, as the pound has been putting pressure on the dollar. However, the activity in the ratio could reflect that we will see the pair move lower.
The pound is red-hot, and on Monday reached levels that have not been seen since February. Will the upward momentum continue? Much will depend on British PMIs, which will be released later in the week. If these key releases meet expectations, we could see the pound continue to post gains against the US dollar.
- 12:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.0%
- 12:30 US Personal Spending. Estimate 0.2%. Actual 0.2%.
- 12:30 US Personal Income. Estimate 0.4%. Actual 0.2%.
- 14:00 US Pending Home Sales. Estimate 1.1%. Actual 1.5%.
- 23:01 British GfK Consumer Confidence
*Key releases are highlighted in bold
*All release times are GMT
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