GBP/USD – Cable Plunges to Lowest Levels Since February

The British pound was hit hard in Thursday trade, coughing up about 160 points to the surging US dollar. The pair has stabled on Friday, as GBP/USD trades just above the 1.63 line. The pound has lost about 300 points this week and is trading at its lowest level against the dollar since February. In the UK, today’s sole event, Consumer Inflation Expectations, rose slightly with a gain of 2.8%. In the US, Nonfarm Employment Change dropped sharply to 142 thousand in August. The unemployment rate edged lower to 6.1%.

US employment data continues to be a concern, as the eagerly-anticipated Nonfarm Employment Change crashed to just 142 thousand, its lowest gain since January. The markets had expected a gain of 226 thousand. This follows a weak ADP Nonfarm Payrolls report as well as a rise in unemployment claims. There was better news from the services sector, as the ISM Non-Manufacturing PMI continued its impressive climb, hitting 59.6 points in August, well above the estimate of 57.3. This reading follows the ISM Manufacturing PMI, which climbed to 59.0 points. The impressive readings from the manufacturing and services sectors point to a balanced economic recovery. If US numbers continue to improve, we could see an interest rate hike in the early part of 2015.

There were no surprises from the BoE on Thursday, which held steady with its monetary policy. The central bank maintained interest rate levels at 0.50%, where rates have been pegged since February 2009. With two MPC members voting in favor of raising rates last month, the markets will be keenly interested in seeing the breakdown of Thursday’s vote, which will be released in two weeks time. If the minutes show that additional MPC members are in favor of a rate hike, BoE Governor Mark Carney will be under pressure to raise rates and the pound could gain ground. The central bank also kept QE steady at 375 billion pounds.

GBP/USD for Friday, September 5, 2014

GBP/USD September 5 at 13:10 GMT

GBP/USD 1.6311 H: 1.6332 L: 1.6284

GBP/USD Technical

• GBP/USD has been slightly above the 1.63 line for most of the day.
• 1.6263 is an immediate support line. 1.6141 is next.
• 1.6382 has reverted to a resistance role as the pound sustained sharp losses on Thursday. 1.6484 follows.
• Current range: 1.6263 to 1.6382.

Further levels in both directions:

• Below: 1.6263, 1.6141, 1.6000 and 1.5864
• Above: 1.6382, 1.6484, 1.6565 and 1.6700

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Friday, reversing the direction seen a day earlier. This is consistent with the pair’s movement, as the pound has stabilized and has posted small gains. The ratio has a large majority of long positions, indicative of trader bias towards the pound moving to higher ground.

GBP/USD Fundamentals

• 00:15 US FOMC Member Richard Fisher Speaks.
• 1:00 US FOMC Member Narayana Kocherlakota Speaks.
• 8:30 British Consumer Inflation Expectations. Actual 2.8%.
• 12:30 US Nonfarm Employment Change. Estimate 226K. Actual 142K.
• 12:30 US Unemployment Rate. Estimate 6.1%. Actual 6.1%. 
• 12:30 US Average Hourly Earnings. Estimate 0.2%. Actual 0.2%.

* Key releases are highlighted in bold

*All release times are GMT

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