GBP/USD – Little Movement as Pound Shrugs Off Strong Job Data

The pound is showing limited movement on Wednesday, as GBP/USD is trading just above the 1.51 line. On the release front, it was a busy day in the UK. Unemployment claims dropped by 29.7 thousand, which was better than expected. The Average Earnings posted a gain of 1.7%, matching the forecast. There was a shift in the BOE vote on interest rates, as all MPC members voted against a rate hike. In the US, today’s releases painted a mixed picture. Building Permits fell short of expectations, coming in at 1.03 million. Housing Starts was up sharply, improving to 1.09 million.

There was good news on the UK employment front, which has consistently been a bright spot in the British economy. Claimant Count Change dropped by 29.7 thousand, easily beating the forecast of -24.2 thousand. The unemployment rate followed suit and dropped from 5.9% to 5.8%. There was an important shift in the BOE voting pattern on the previous interest rate decision, with a unanimous (9-0) vote to maintain rates at their current level of 0.50%. This marked a change from recent votes, in which two members had voted in favor of raising rates. The unanimous decision reflects the “new order” in which the UK and other industrialized countries must deal with rapidly falling inflation, due in large part to oil prices which have fallen by 50% since the summer. This has eased pressure on the BOE to raise rates.

World markets were in turmoil following last week’s bombshell from the Swiss central bank, which abruptly abandoned its EUR/CHF cap, leaving the euro out to dry against the Swiss franc. As the markets await the ECB policy meeting on Thursday, is this the calm before the next storm? On Wednesday, French President Francois Hollande stated flat out that the ECB will announce a quantitative easing package at the ECB meeting. However, now that a QE is likely priced in, the question remains what will be the size of the program? The markets are anticipating QE of between EUR 500-600 billion, but some market players are saying that the ECB could go as high as EUR 800 billion. Will the euro take a hit on Thursday? The likelihood is yes, unless the ECB surprises with a “QE lite”, such as EUR 300 billion, which would be well below expectations.

GBP/USD for Wednesday, January 21, 2015

GBP/USD January 21 at 16:20 GMT

GBP/USD 1.5112 H: 1.5179 L: 1.5076

GBP/USD Technical

• GBP/USD moved higher in the Asian session, testing resistance at 1.5165. The pair lost ground in European trade and is steady in the North American session.
• On the upside, 1.5165 is a weak line and could see further pressure during the North American session. 1.5282 is stronger.
• 1.5008 is a strong support level, protecting the symbolic 1.50 line.
• 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 unchanged on Wednesday. This is consistent with the lack of movement we are seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the pound moving upwards.

GBP/USD Fundamentals

• 9:30 British Average Earnings Index. Estimate 1.7%. Actual 1.7%.
• 9:30 British Claimant Count Change. Estimate -24.2K. Actual -29.7K.
• 9:30 MPC Official Bank Rate Votes. Estimate 2-0-7. Actual 0-0-9.
• 9:30 MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9. 
• 9:30 British Unemployment Rate. Estimate 5.9%. Actual 5.8%.
• 13:30 US Building Permits. Estimate 1.06M. Actual 1.03M.
• 13:30 US Housing Starts. Estimate 1.04M. Actual 1.09M.

*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.