GBP/USD – Pound Rises on Sharp UK Manufacturing Production Report

The pound has posted gains on Friday, as the pound tries to reverse a week’s worth of declines against the dollar. In the European session, GBP/USD is trading in the mid-1.51 range. On the release front, British Manufacturing Production posted a strong gain of 0.7%. The UK trade deficit narrowed to GBP -8.8 billion, beating expectations. Later in the day, we’ll get a look at NIESR GDP Estimate. In the US, today’s highlight is Non-Farm Employment Change. As well, the US unemployment rate will be released.

British releases wrapped up the week on a high note, as Manufacturing Production gained 0.7% in November, above the forecast of 0.4%. This marked the key indicator’s strongest showing since February. Meanwhile, the trade deficit continues to shrink, as the November report came in at GBP-8.8 billion, the smallest trade deficit in eight months. The estimate stood at GBP-9.5 billion. The trade gap was aided by a strong decrease in oil imports, which dropped to their lowest level in over four years.

US employment data is in the spotlight, as the markets wait for the Nonfarm Employment Change and unemployment rate reports for December. Nonfarm Employment Change is one of the most important economic indicators, and traders should treat this event as a market-mover. The indicator had an outstanding reading of 321 thousand in November, but is expected to soften to 241 thousand in December. The unemployment rate has been creeping lower, and is expected to dip to 5.7%, down from 5.8% in November.

The Federal Reserve released the minutes of its previous meeting on Wednesday, with no surprises for the markets. There had been plenty of speculation that the insertion of the word “patience” in the previous policy statement signaled a more aggressive monetary stance. However, the minutes stated that Fed members remained of the view that Fed policy had not changed, and that a rate hike was unlikely before April.  Although economic growth continues to improve, inflation remains at very low levels, which means that the economy is in no danger of overheating, so there is no immediate need for a rate increase.

GBP/USD for Friday, January 9, 2015

GBP/USD January 9 at 11:35 GMT

GBP/USD 1.5146 H: 1.5154 L: 1.5084

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair has posted gains in the European session, as the pair continues to put pressure on resistance at 1.5165.
• 1.5165 remains a weak resistance line. Will the pair break through before the end of the trading week? 1.5282 is a stronger line.
• 1.5008 is a strong support line, protecting the key 1.50 level.
• Current range: 1.5008 to 1.5165

Further levels in both directions:

• Below: 1.5008, 14873, 1.4781 and 1.4670
• Above: 1.5165, 1.5282, 1.5392, 1.5505 and 1.5644

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 posted gains. The ratio has a majority of long positions, indicative of trader bias towards the pair continuing to move upwards.

GBP/USD Fundamentals

• 9:30 British Manufacturing Production. Estimate 0.4%. Actual 0.7%.
• 9:30 British Trade Balance. Estimate -9.5B. Actual -8.8B.
• 9:30 British Construction Output. Estimate 1.3%. Actual -2.0%.
• 9:00 British Industrial Production. Estimate 0.2%. Actual -0.1%.
• 13:30 US Nonfarm Employment Change. Estimate 241K.
• 13:30 US Unemployment Rate. Estimate 5.7%.
• 13:30 US Average Hourly Earnings. Estimate 0.2%.
• 14:00 US Wholesale Inventories. Estimate 0.4%.
• 18:20 US FOMC Member Jeffrey Lacker Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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