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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

S3 S2 S1 R1 R2 R3
1.4873 1.5008 1.5165 1.5282 1.5392 1.5505

 

Further levels in both directions:

 

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

*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 [4]

Currency Analyst at Market Pulse [5]
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.