The British pound is stable in Monday trading, following sharp losses last week against the US dollar. In Monday’s North American session, GBP/USD is trading in the high-1.68 range. Today’s US highlight is the Federal Budget Balance. In the UK, the sole release is BRC Retail Sales Monitor.
There were no surprises from the BOE last week, as it maintained two key components of its monetary policy. The Bank kept its bond-purchase scheme at 375 billion pounds, where it has been pegged since July 2010. As well, interest rates remained at 0.50%, unchanged since March 2009. There has been pressure on the BOE to raise rates as the British recovery continues. Last week, the OECD raised its forecast for UK growth for 2014 from 2.4% to 3.2%. As well, the influential Confederation of British Industry has raised its growth forecasts and says we could see a rate hike in early 2015. 
US Unemployment Claims rebounded last week, as the key indicator dipped to 319 thousand. This beat the estimate of 328 thousand. The reading follows last week’s excellent Nonfarm Payrolls and Unemployment Claims. JOLTS Jobs Openings failed to keep pace, slipping to 4.01 million, well off the estimate of 4.21 million. With the employment picture brightening, market sentiment remains strong toward the US economy, and this could strengthen the US dollar.
Federal Reserve Chair Janet Yellen testified before Congress last week, and gave a cautious thumbs-up to the economic recovery. She said that the economy has improved, but pointed to two sore spots – the job market remains weak and inflation is below the Fed’s target of 2%. Yellen stated that she therefore expects that low interest rate levels will continue for a “considerable time”. Yellen has stated previously that slack remains in the economy, and the Fed is expected to proceed carefully with future trims to its QE scheme. Since December, the Fed has trimmed the asset-purchase program by almost half, cutting it to $45 billion each month.
GBP/USD for Monday, May 12, 2014
GBP/USD May 12 at 15:35 GMT
GBP/USD 1.6873 H: 1.6902 L: 1.6847
- GBP/USD has posted small gains on Monday.
- On the upside, 1.6896 is providing weak resistance and was briefly breached earlier in the day. The next resistance line is the round number of 1.7000.
- 1.6765 is providing strong support.
Further levels in both directions:
- Below: 1.6765, 1.6705, 1.6549 and 1.6436
- Above: 1.6896, 1.70, 1.7210, 1.7374 and 1.7538
OANDA’s Open Positions Ratio
GBP/USD ratio is pointing to gains in long positions in Monday trading. This is consistent with the movement of the pair, as the pound has posted small gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving upwards.
GBP/USD is showing little movement on Monday. The US dollar has edged lower in the North American session.
- 8:30 British BRC Retail Sales Monitor.
- 16:00 US FOMC Member Charles Plosser Speaks.
- 18:00 US Federal Budget Balance. Estimate 112.6B.
*Key releases are highlighted in bold
*All release times are GMT
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