GBP/USD – Pound’s Woes Continues As UK Employment Data Disappoints

The British pound continues lose ground on Wednesday trading, as GBP/USD has dropped below the 1.68 line. The pound has run into a brick wall, shedding about two cents in the past week after testing the 1.70 level. In economic releases, Claimant Count Change disappointed, touching a four-month high. In London, BOE Governor Mark Carney reiterated that there is slack in the economy and the BOE had no plans to raise interest rates before 2015. Over in the US, Producer Price Index beat the estimate.

British Claimant Change was respectable in April, but the markets were looking for more. The key indicator came in at -25.1 thousand, missing the estimate of -30.7 thousand. The  unemployment rate remained pegged at 6.8%, matching the forecast. With speculation swirling about when the BOE might raise rates, every employment release will be under the market microscope.

Low inflation levels have been a persistent problem in the US, and Fed chair Yellen highlighted this issue when speaking before Congress last week. Inflation levels are nowhere near the Fed’s target of 2.0%, and weak inflation is a sign of an underperforming US economy. There was good news on Wednesday as PPI, a key inflation indicator, edged higher in April, coming in at 0.6%. This easily beat the estimate of 0.2%. Core PPI also beat the estimate, posting a gain of 0.5%.

US Retail Sales and Core Retail Sales are key gauges of consumer spending, and are carefully tracked by the markets. Both indicators were weak in April. Core Retail Sales dropped to 0.0%, well off the estimate of 0.6%. Retail Sales followed suit, with a paltry gain of just 0.1%, compared to an estimate of 0.5%.

GBP/USD for Wednesday, May 14, 2014

GBP/USD May 14 at 15:20 GMT

GBP/USD 1.6784 H: 1.6874 L: 1.6854

GBP/USD Technical

• GBP/USD has posted losses on Wednesday. The pair dropped below the 1.68 line in the European session.
• On the upside, 1.6896 has strengthened as the pound continues to lose ground.
• On the downside, 1.6765 is providing weak support. This line could face pressure during the day.

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 Wednesday trading. This is not consistent with the movement of the pair, as the pound has posted losses. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to post gains against the pound.

GBP/USD continues to lose ground on Wednesday. The pair is stable in the North American session.

GBP/USD Fundamentals

• 8:30 British Claimant Count Change. Estimate -30.7 thousand. Actual -25.1 thousand. 
• 8:30 British Unemployment Rate. Estimate 6.8%. Actual 6.8%. 
• 8:30 British Average Earnings Index. Estimate 2.2%. Actual 1.7%.
• 9:30 BOE Governor Mark Carney Speaks.
• 9:30 BOE Inflation Report.
• 12:30 US PPI. Estimate 0.2%. Actual 0.6%.
• 12:30 US Core PPI. Estimate 0.2%. Actual 0.5%.
• 14:30 US Crude Oil Inventories. Estimate -0.4M. Actual +0.9M.

*Key releases are highlighted in bold

*All release times are GMT

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