GBP/USD – Pound Slips But Recovers as CPI Softens

The pound has shown some volatility on Tuesday, but is almost unchanged on the day. In the North American session, GBP/USD is trading in the mid-1.51 range. On the release front, British CPI slipped to 0.5%, its weakest gain in almost 15 years. In the US, JOLTS Jobs Openings jumped to 4.97 million, well above expectations.

British CPI, the primary gauge of consumer inflation, continues to soften. The index posted a gain of just 0.5% in December, down from a 1% gain a month earlier. This marked the indicator’s weakest gain since May 2000. Meanwhile, inflation in the fourth quarter was 0.9%, shy of the BOE’s forecast of 1.2% in November. On Tuesday, BOE Governor Mark Carney said that inflation levels could continue to fall, and this could affect any decisions regarding an interest rate hike. It wasn’t long ago that a rate hike seemed imminent, but the dramatic drop in inflation has eased the pressure on the BOE to take monetary action. The Federal Reserve, meanwhile, is likely to raise rates sometime in 2015. If this divergence in monetary stance continues, market sentiment could sour on the pound in favor of the US dollar.

US job numbers have looked sharp, and the trend continued on Tuesday, as JOLTS Jobs Openings climbed to 4.97 million, easily beating the forecast of 4.86 million. This is the indicator’s highest level since January 2001. The strong employment numbers are a welcome result of the robust economy, as the deepening recovery fuels demand for more workers. The health of the labor market is an important component of any decision to raise interest rates, so upcoming employment releases will be under the market microscope as the Fed mulls when to raise interest rates.

GBP/USD for Tuesday, January 13, 2015

GBP/USD January 13 at 16:45 GMT

GBP/USD 1.5174 H: 1.5192 L: 1.5078

GBP/USD Technical

• GBP/USD lost ground in the Asian session. This trend continued early in the European session, as the pair tested support at 1.5165. GBP/USD then moved higher, recovering the earlier losses. The pair is unchanged in the North American session.
• 1.5165 is a weak support level. 1.5008 is stronger.
• 1.5282 is a strong resistance line.
• Current range: 1.5165 to 1.5282

Further levels in both directions:

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

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Tuesday, continuing the direction seen a day earlier. This is not consistent with the pair’s movement, as the pound is almost unchanged on the day. The ratio is almost evenly split between long and short positions, indicative of a lack of trader bias as to the next move by the pair.

GBP/USD Fundamentals

• 00:01 British BRC Retail Sales Monitor. Actual -0.4%.
• 9:30 British CPI. Estimate 0.7%. Actual 0.5%.
• 9:30 British PPI Input. Estimate -2.5%. Actual -2.4%.
• 9:30 British RPI. Estimate 1.7%. Actual 1.6%.
• 9:30 British Core CPI. Estimate 1.4%. Actual 1.3%.
• 9:30 British HPI. Estimate 10.1%. Actual 10.0%.
• 9:30 British PPI Output. Estimate -0.1%. Actual -0.3%.
• 12:30 US NFIB Small Business Index. Estimate 98.6 points. Actual 100.4 points.
• 15:00 US JOLTS Jobs Openings. Estimate 4.86M. Actual 4.97M.
• 15:00 US IBD/TIPP Economic Optimism. Estimate 48.9 points. Actual 51.5 points.
• 18:01 US 10-year Bond Auction.
• 19:00 US Federal Budget Balance. Estimate 3.8B.

*Key releases are highlighted in bold

*All release times are GMT

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