The British pound posted sharp losses against the dollar in Tuesday trading. GBP/USD is down one cent in the North American session, trading in the mid-1.48 range. The pound reacted negatively to weak British numbers, highlighted by a disappointing Manufacturing Production release. In the US, it was a quiet day, with just two releases on the schedule. NFIB Small Business Index slid lower, while JOLTS Job Openings came in slightly above the estimate.
This week’s sole major event out of the UK, Manufacturing Production, posted a drop of 0.8%, confounding the markets, which had anticipated a gain of 0.3%. The dismal news continued as Industrial Production slipped to a flat 0.0%, missing the estimate of 0.3%. Trade Balance brought no relief, as the deficit swelled from -8.2 billion pounds to -8.5 billion. The silver lining was NIESR GDP Estimate, which provides a monthly look at GDP. The indicator posted a respectable gain of 0.6%, matching the June release. The pound dropped sharply after the weak numbers were posted, and dropped as low as 1.4813, the pound’s lowest level against the dollar since June 2010.
Meanwhile, there was some good news for the UK, as the International Monetary Fund revised its forecast of UK growth in 2013. The IMF said that the economy would grow by 0.9% this year, compared with an earlier forecast of 0.6%. This marks the first major upgrade of the UK’s economic outlook in almost three years, and is welcome news for the government, which has implemented austerity measures in an attempt to get its fiscal house in order. The IMF has not been very positive about the UK economy, and an IMF official downplayed the revision, saying that economic growth still remains weak.
In the Eurozone, the political crisis which gripped Portugal last week is over, according to Prime Minister Pedro Passos Coelho. The country has been struggling with austerity measures as part of its bailout program, and the government looked like it might fall after the the finance and foreign ministers tendered their resignations. Coelho said a deal had been reached with a junior coalition party, which would ensure that the government remains in power. There was concern in the Eurozone that the crisis could derail the 78 billion bailout agreement which Portugal received. The deal which would keep the government afloat is subject to the approval of Portugal’s president, Anibal Cavaco Silva. He continues to meet with the country’s political parties, and a decision is expected shortly.
Eurozone financial ministers met on Monday, and decided to release more bailout aid to Greece, but with a catch, as only part of the scheduled tranche of 8.1 billion euros will be transferred to Athens. Under the new arrangement, Greece will receive 3 billion euros in July and additional funds in August and October. The Eurogroup decision to give Greece only a portion of the funds currently reflects growing unease with the lack of progress by Athens in implementing the bailout conditions, including improved tax collection and cuts to the bloated public service. Greece has been put on notice that it will have to show more progress in economic restructuring before the troika releases more bailout funds.
GBP/USD for Tuesday, July 9, 2013
GBP/USD July 9 at 15:30 GMT
GBP/USD 1.4835 H: 1.4981 L: 1.4934
GBP/USD has posted sharp losses in Tuesday trading. The pair is facing resistance at 1.4896. This is followed by resistance at the important round number of 1.5000. On the downside, the pair is receiving support at 1.4781. This line has held firm since June 2010. The next support level is at 1.4690.
- Current range: 1.4781 to 1.4896
Further levels in both directions:
- Below: 1.4781, 1.4690, 1.4465 and 1.4346
- Above: 1.4896, 1.5000, 1.5111, 1.5203, 1.5309 and 1.5432
OANDA’s Open Positions Ratio
GBP/USD ratio is showing significant movement towards short positions. This is reflected in the current movement of the pair, as the pound has dropped sharply against the dollar. The ratio has a large majority of long positions, in contrast to the close split between long and short positions which we saw last week.
The pound took a hit on Tuesday, and flirted with multi-year lows after some poor releases, highlighted by Manufacturing Production, a key release. Will the pound’s woes continue? We could see some volatility from GBP/USD on Wednesday, as the Federal Reserve releases minutes of the last policy meeting.
- 8:30 British Manufacturing Production. Estimate 0.3%. Actual -0.8%.
- 8:30 British Trade Balance. Estimate -8.4B. Actual -8.5B.
- 8:30 British Industrial Production. Estimate 0.3%. Actual 0.0%.
- 11:30 US NFIB Small Business Index. Estimate 96.2 points. Actual 93.5 points.
- 14:00 US JOLTS Job Openings. Estimate 3.81M. Actual 3.83M.
- 14:00 British NIESR GDP Estimate. Actual 0.6%.
*Key releases are highlighted in bold
*All release times are GMT