GBP/USD – Steady As US Posts Mixed Mfg. Data

GBP/USD is steady on Monday, as the pair trades in the low-1.63 range in the North American session. In economic news, British Rightmove HPI continues to look weak, as the housing indicator posted its fourth decline in the past five releases. Meanwhile, the US posted mixed releases from the manufacturing sector. The Empire State Manufacturing Index was well short of the estimate, while Industrial Production posted its sharpest gain in 2013.

There was some good news on the fiscal front, as the US House of Representatives easily passed a budget deal on Thursday. The agreement, which will be voted on by the Senate next week, will remove the risk of a government shutdown and reduces the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the fiscal uncertainty we’ve seen in recent months.

US employment numbers have generally been solid recently, although last week’s release disappointed, posting a nine-week high.  The Fed has said that a stronger employment picture is a prerequisite to tapering, and there is speculation that the Fed could make a move this week, although there’s a greater likelihood that we won’t see a taper until early next year. Still, the two-day Fed policy meeting, which begins on Tuesday, is the event of the week and will be closely monitored by the markets. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper would likely boost the US dollar against the major currencies.

Over in the UK, recent solid releases point to an economy that continues to pick up steam. This was underscored by a strong reading from NIESR GDP last week. This monthly indicator helps analysts track GDP, which is only released each quarter. The indicator posted gain of 0.8% in November, slightly up from the previous release of 0.7%. If British releases continue to point upwards, speculation will likely increase that the Bank of England may raise interest rates. BOE head Mark Carney has tried to dampen such sentiment, insisting that there is still plenty of slack in the economy and that the Bank has no plans to raise rates in the near future.

GBP/USD for Monday, December 16, 2013

GBP/USD December 16 at 15:50 GMT

GBP/USD 1.6319 H: 1.6349 L: 1.6290

GBP/USD Technical

• GBP/USD is trading quietly on Monday. The pair touched a high of 1.6349 in the European session but was unable to consolidate at these levels.
• The round number of 1.6300 continues to provide support. This is weak line which could break if the pound loses ground. This is followed by a support level at 1.6231.
• On the upside, the pair faces resistance at 1.6476. This is followed by resistance at the round number of 1.6600, which has remained intact since August 2011.
• Current range: 1.6300 to 1.6476

Further levels in both directions:

• Below: 1.6300, 1.6231, 1.6125, 1.6000 and 1.5893
• Above: 1.6475, 1.66, 1.6705 and 1.6964

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in Monday trading. This is reflected in the pair’s current movement, which has shown little activity on Monday. Short positions continue to dominate the ratio, reflecting a trader bias towards the US dollar making further gains against the pound.

The pair has not shown much activity to begin the trading week. With no major releases out of the US on Monday, it could be a quiet North American session.

GBP/USD Fundamentals

• 13:30 US Empire State Manufacturing Index. Estimate 4.9 points. Actual 1.0 points.
• 13:30 US Revised Nonfarm Productivity. Estimate 2.9%. Actual 3.0%.
• 13:30 US Revised Unit Labor Costs. Estimate -1.5%. Actual -1.4%.
• 14:00 US Flash Manufacturing PMI. Estimate 54.9 points. Actual 54.4 points.
• 14:00 US TIC Long-Term Purchases. Estimate 31.4B. Actual 35.4B.
• 14:15 US Capacity Utilization Rate. Estimate 78.5%. Actual 79.0%.
• 14:15 US Industrial Production. Estimate 0.6%. Actual 1.1%.

*Key releases are highlighted in bold

*All release times are GMT

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