GBP/USD – Pound Jumps on Hopes for No Vote in Scotland

The pound has posted sharp gains on Thursday, as GBP/USD trades in the mid-1.63 range in the North American session. The currency received a boost on hopes that Scottish voters in today’s referendum will decide to keep Scotland in the United Kingdom. Overshadowed by the focus on the Scottish referendum, British Retail Sales improved last month, posting a gain of 0.4%. CBI Industrial Order Expectations came in at -4 points, the worst showing since last September. The markets had expected a gain of 9 points. In the US Unemployment Claims dropped to 280 thousand, but Building Permits softened last month. The Philly Fed Manufacturing Index fell sharply in August. As well, Fed Chair Janet Yellen spoke at a conference in Washington.

US Unemployment Claims has looked sluggish over the past two readings, but that changed on Thursday, as the key indicator sparkled, dropping to 280 thousand, down sharply from 315 thousand in the previous reading. The estimate stood at 312 thousand. Building Permits was not as strong, dipping to 1.00M. This was shy of the estimate of 1.04M. There was disappointing news from the manufacturing front, as the Philly Fed Manufacturing Index slipped to 22.5 points, down from 28.0 a month earlier. The estimate stood at 22.8 points.

The struggling British pound received a boost on Wednesday, as employment numbers were solid. Claimant Count Change dropped by -37.2 thousand, its best showing since October. This was much better than the estimate of 27.9 thousand. The unemployment rate dipped to an impressive 6.2%, its sixth straight drop this year. This edged below the estimate of 6.3%. Elsewhere, there were no surprises from the BoE votes on asset purchases and interest rate levels. The vote to maintain asset purchases was 9-0, while there was a split of 7-2 over interest rate levels, the same outcome as the previous vote. The majority of board members voted to maintain rates at 0.50%, while two members were in favor of an immediate rate hike.

The news on the inflation front was not as positive, as British CPI, the primary gauge of consumer inflation, dropped to 1.5%, which matched the forecast. The index has lost ground for two straight months, pointing to weaker consumer demand. There was no relief from PPI Input, as the manufacturing inflation index posted its ninth consecutive decline, at -0.6%. This was well short of the estimate of +1.0%.

Will the United Kingdom remain united on Friday? It’s anyone’s guess as Scottish voters cast their ballots in a historic referendum on independence on Thursday. The most recent polls are pointing to a close vote, with many voters still undecided. The markets appear confident of a narrow victory for the No camp, as the pound has posted  sharp gains on Thursday. If voters do choose to secede from the UK, this would create plenty of questions and uncertainty, including what currency an independent Scotland would use and how the national debt would be divided. A vote to split up the UK could lead to turmoil in the markets and weigh heavily on the markets. Traders should treat the referendum as a market-mover, as a close vote could have negative repercussions for the pound.

GBP/USD for Thursday, September 18, 2014

GBP/USD September 18 at 16:20 GMT

GBP/USD 1.6377 H: 1.6408 L: 1.6252

GBP/USD Technical

• The pound posted gains late in the Asian session and throughout most of the European session. The pair is steady in North American trade.
• 1.6263 has reverted to a support level as the pound trades at higher levels. It is a strong line.
• 1.6382 is an immediate resistance line. This line was breached earlier and could see further action during the day. 1.6484 is stronger.
• 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, 1.6605 and 1.6755

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Thursday, continuing the direction seen a day earlier. This is consistent with the pair’s movement, as the pound has posted gains. The ratio currently has a majority of long positions, indicative of trader bias towards the pound continuing its rally against the US dollar.

GBP/USD Fundamentals

• 8:30 British Retail Sales. Estimate 0.4%. Actual 0.4%.
• 8:30 British CBI Industrial Order Expectations. Estimate 9 points. Actual -4 points.
• All Day – Scottish Independence Vote.
• 12:30 US Building Permits. Estimate 1.04M. Actual 1.00M. 
• 12:30 US Unemployment Claims. Estimate 312K. Actual 280K.
• 12:30 US Housing Starts. Estimate 1.04M. Actual 0.96M.
  
• 12:45 US Federal Reserve Chair Janet Yellen Speaks.
• 14:00 US Philly Fed Manufacturing Index. Estimate 22.8 points. Actual 22.5 points.
• 14:30 US Natural Gas Storage. Estimate 91B. Actual 90B.

* Key releases are highlighted in bold

*All release times are GMT

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