GBP/USD – Another Weak PMI Can’t Dent Pound

The British pound continues to post gains against the US dollar in Wednesday trading. In the North American session, the pair is trading in the mid-1.62 range. In economic news, the British Construction PMI dropped slightly in August and missed the estimate. US employment data did not impress, as ADP Non-Farm Payrolls slipped to a four-month low. In the meantime, the US government shutdown has entered its second day, as Republicans and Democrats continue to squabble over how to end the budget crisis which has crippled the government.

The US shutdown continues, as Congress remains in a partisan deadlock over how to come to some agreement over the federal budget. With the government lacking funds to operate, it has been forced to close non-essential services and send almost a million government workers home. The Republicans and Democrats are entrenched in their positions, but public pressure may force the politicians to get their act together quickly. If things are resolved sometime this week, it will have been more of a nuisance than a crisis. However, a much more serious crisis could occur in two weeks if Congress doesn’t reach an agreement on raising the debt ceiling. If that happens, the Treasury would be unable to pay all of its bills and the economic fallout could be tremendous.

The Federal Reserve surprised the markets in September when it didn’t taper QE, and the next dates to circle are October 29- 30, when the Fed holds its next policy meeting. Employment data will be an important factor in the Fed’s decision, and the US will release ADP Non-Farm Payrolls later on Wednesday. The all-important Non-Farm Payrolls, due for release on Friday, faces cancellation if the government shutdown continues.

After a strong run by British PMIs in recent months, have these key indicators run out of steam? Earlier in the week, Manufacturing PMI dropped for the first time since January. The index dropped from 57.2 to 56.7 points in August, short of the forecast of 57.5 points. On Tuesday, Construction PMI dropped marginally, from 59.1 to 58.9 points in August, but this fell short of the estimate of 60.1. These are still strong readings, and the surging pound has shrugged off these declines. However, if Services PMI also registers a decline on Thursday, the markets could start to get nervous and the pound’s rally could slow down. Meanwhile, the pound has had a remarkable run, gaining over seven cents against the US dollar in little more than a month.


GBP/USD for Wednesday, October 2, 2013

Forex Rate Graph 15/1/13

GBP/USD October 2 at 14:45 GMT

GBP/USD 1.6251 H: 1.6263 L: 1.6231


GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6000 1.6125 1.6231 1.6300 1.6421 1.6504


  • GBP/USD continues to post modest gains. In the European session, the pair pushed barreled past the 1.62 line deep into 1.62 territory.
  • The pair is receiving support at 1.6231. This is a weak line which could be tested. This is followed by support at 1.6125.
  • On the upside, the pair is facing resistance at 1.6300. This line was last tested in December 2012. Next, there is resistance at 1.6421.
  • Current range: 1.6231 to 1.6300


Further levels in both directions:

  • Below: 1.6231, 1.6125, 1.6000, 1.5877, 1.5756, 1.5645 and 1.5527
  • Above: 1.6300, 1.6421 and 1.6504, 1.6573


OANDA’s Open Positions Ratio

The GBP/USD ratio is pointing to movement towards long positions in Wednesday trading. This is reflected in the pair’s current movement, as the pound continues to post gains against the dollar. The ratio is comprised of a majority of short positions, which reflects a bias in favor of the US dollar reversing directions and moving to higher ground.

GBP/USD continues its steady march upwards and has broken above the 1.62 line. We could see some further activity from the pair, as the markets keep a close eye on the continuing budget standoff in Washington.


GBP/USD Fundamentals

  • 8:30 British Construction PMI. Estimate 60.1 points. Actual 58.9 points.
  • 8:30 British Housing Equality Withdrawal. Estimate -7.2B. Actual -15.4B.
  • 11:00 Bank of England Executive Director Paul Fisher Speaks.
  • 12:15 US ADP Non-Farm Employment Change. Estimate 177K. Actual 166K.
  • 14:30 US Crude Oil Inventories. Estimate 2.4M. Actual 2.5M.
  • 16:00 US FOMC Member Eric Rosengren Speaks. Rosengren is dovish in stance.
  • 19:30 US Federal Reserve Chairman Bernard Bernanke Speaks.


*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

Market Analyst at OANDA
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, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.