GBP/USD – Pound Loses Ground As Fed Statement Looms

GBP/USD has posted strong gains on Wednesday, as the pair trades in the mid-1.56 range in the North American session. On the release front, Claimant Count Change posted a strong reading of -26.9 thousand, but the unemployment rate edged up to 6.0%. There were no surprises from the Bank of England, as the voting breakdown for the interest rate and QE decisions matched expectations. In the US, CPI disappointed, posting a decline of 0.3%. Core CPI posted a small gain of 0.1%. The markets are eagerly awaiting the Federal Reserve  policy statement later on Wednesday.

In the UK, employment data was mixed, as Claimant Count Change dropped by 26.9 thousand, easily beating the estimate of -19.8 thousand. However, the unemployment rate unexpectedly moved higher, edging up to 6.0%. The Average Earnings Index improved to 1.4%, up from 1.0% a month earlier. The estimate stood at 1.3%.

Over in the US, inflation indicators continue to look very weak. CPI, the primary gauge of consumer inflation, dropped 0.3%, below the estimate of -0.1%. This was the indicator’s weakest reading in over a year. Core CPI posted a weak gain of 0.1%, matching the forecast. The Federal Reserve will be in the spotlight on Wednesday, as the FOMC issues its monthly policy statement. With the US economy continuing to grow, the markets are confident that the Fed will take action and raise interest rates in the first half of 2015. One key question is whether the Fed will adjust its forward guidance; that is, will the Fed make use of policy statements to provide the markets with more information about its projections regarding interest rate policy. If this does occur, there will be less uncertainty about the Fed’s monetary policy and this could boost the US dollar against its major rivals.

Inflation was on the mind of the markets and the BOE on Tuesday, as the UK released CPI as well as a host of other inflation indicators. CPI continues to lose ground, falling to 1.0%, its lowest level since 2002. Still, the key indicator was within expectations, as the estimate stood at 1.2%. The BOE released its Financial Stability Report, noting that although the sharp fall in oil prices should boost domestic growth, it could result in inflation projections missing their target. Lower inflation levels give the BOE some breathing room regarding a rate hike in 2015, which only a few months ago seemed like a sure bet.

 

GBP/USD for Wednesday, December 17, 2014

GBP/USD December 17 at 17:40 GMT

GBP/USD 1.5640 H: 1.5743 L: 1.5640

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5282 1.5392 1.5505 1.5644 1.5717 1.5864

 

  • GBP/USD posted losses in the Asian session. The pair was choppy in the European session. GBP/USD has resumed its downward movement in North American trade.
  • On the upside, 1.5644 has reverted to a resistance role as the pound has lost ground. This line is under pressure. 1.5717 is stronger.
  • 1.5505 is a strong support level.
  • Current range: 1.5505 to 1.5644

Further levels in both directions:

  • Below: 1.5505, 1.5392, 1.5282 and 1.5165
  • Above: 1.5644, 1.5717, 1.5864, 1.6000 and 1.6141

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Wednesday, continuing the direction seen a day earlier. This is not consistent with the movement of the pair, as the pound has posted losses. The ratio is pointing to a majority of long positions, indicative of trader bias towards the pound reversing directions and moving higher.

GBP/USD Fundamentals

  • 9:30 British Average Earnings Index. Estimate 1.3%. Actual 1.4%.
  • 9:30 British Claimant Count Change. Estimate -19.8K. Actual -26.9K.
  • 9:30 British Claimant Count Change. Estimate -19.8K. Actual -26.9K.
  • 9:30 British MPC Official Bank Rate Votes. Estimate 2-0-7. Actual 2-0-7.
  • 9:30 British Asset Purchases Facility Votes. Estimate 0-0-9. Actual 0-0-9.
  • 9:30 British Unemployment Rate. Estimate 5.9%. Actual 6.0%.
  • 13:30 Canadian Wholesale Sales. Estimate 0.9%. Actual 0.1%.
  • 13:30 US CPI. Estimate -0.1%. Actual -0.3%.
  • 13:30 US Core CPI. Estimate 0.1%. Actual 0.1%.
  • 13:30 US Current Account. Estimate -98B. Actual 100B.
  • 15:30 US Crude Oil Inventories. Estimate -2.6M. Actual -100B.
  • 19:00 US FOMC Economic Projections.
  • 19:00 US FOMC Statement.
  • 19:00 US Federal Funds Rate. Estimate <0.25%.
  • 19:30 US FOMC Press Conference.

*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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.