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GBP/USD – Limited Losses As US Posts Strong Unemployment Claims

The British pound has edged lower in Thursday trading, as GBP/USD trades in the mid-1.63 range. In the UK, it was an uneventful day as both the RICS House Price Balance and 30-year bonds showed little change in December. In the US, Unemployment Claims met expectations with another strong release, while the Philly Fed Manufacturing Index hit a three-month high. Core CPI looked weak, posted a gain of 0.1%. Later on, Fed chair Bernard Bernanke will deliver a speech in Washington.

US Unemployment Claims looked sharp, dropping slightly to 327 thousand, very close to the estimate of 326 thousand. This was welcome news after last week’s shocking Non-Farm Payrolls. Meanwhile, the Philly Fed Manufacturing Index continues to move higher. The indicator jumped to 9.4 points, up from 7.0 points a month earlier. This strong reading beat the estimate of 8.8 points.

Weak inflation levels in the US remain a concern, as this is an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1%. On Tuesday, the Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. On Wednesday, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten.

On Tuesday, the UK released a host of December inflation indicators, and most of the releases were very close to the estimates. CPI, the most important inflation indicator, came in at 2.0%, almost unchanged from 2.1% in November. The estimate stood at 2.1%. The reading dovetails with the Bank of England’s inflation target of 2.0%. CPI has been dropping in recent readings, and this lessens the pressure on the Bank of England to raise interest hikes in response to the improving UK economy [1].

Last week’s disappointing Non-Farm Payrolls report may have created some concern in the markets, but is unlikely to change the Federal Reserve’s path of tapering QE, which it started just this month. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each Fed policy meeting over the course of the year. The Fed next meets for a policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and we will see a reduction in QE at the next policy meeting.

 

GBP/USD for Thursday, January 16, 2014

Forex Rate Graph 21/1/13

GBP/USD January 16 at 16:30 GMT

GBP/USD 1.6342 H: 1.6384 L: 1.6315

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6125 1.6231 1.6329 1.6416 1.6549 1.6705

 

 

Further levels in both directions:

 

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little change in Thursday trading. This is not reflected in the pair’s movement, as the pound continues to lose ground against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to move higher.

The pound has posted modest losses in Thursday trading. The dollar continues to put pressure on the pound in the North American session.

 

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 [5]

Market Analyst at OANDA [6]
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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