GBP/USD – Pound Higher on Strong Job Numbers

The pound has posted strong gains on Wednesday, as GBP/USD is trading in the mid-1.54 range. On the release front, it was a busy day in the UK and US. In the UK, employment numbers were excellent. Claimant Count Change came in at -38.6 thousand, while the unemployment rate dropped to 5.6%. In the US,  Building Permits missed the estimate with a reading of 1.08 million, while PPI posted a sharp decline of 0.8%. Later in the day, the Federal Reserve will release then minutes of its most recent policy meeting.

The first key US readings of the week failed to impress the markets. Building Permits improved to 1.05 million, but this fell short of the estimate of 1.08M. Housing Starts matched the forecast of 1.07 million, down from 1.09 million a month earlier. On the inflation front, PPI was dismal, coming in at -0.8%. This was short of the forecast of -0.4% and marked the indicator’s fourth decline in five months, as the US continues to struggle with weak inflation levels.

The pound pushed higher on Wednesday, boosted by strong job data. Claimant Count Change posted a sharp drop of 38.6 thousand, the strongest drop since November 2013. The unemployment rate dropped from 5.8% to 5.7%. Elsewhere, the MPC minutes indicated that the decisions to maintain interest rates at 0.50% and QE at 375 billion pounds were both unanimous (9-0).

British inflation indicators continue to point to sagging inflation. CPI, the primary gauge of consumer inflation, dipped to 0.3% in January, down from 0.5% a month earlier. This marked a record low reading, and BOE Governor Mark Carney is now required to write a letter to the Chancellor of the Exchequer for a second straight month, as inflation has dropped more than 1% below the BOE’s target of 2.0%. Weak inflation levels have eased pressure on the BOE to raise rates, raising speculation that the central bank will not raise rates in 2015. With the US Federal Reserve moving in the opposite direction, divergence with the BOE could weigh on the pound.

GBP/USD for Wednesday, February 18, 2015

GBP/USD February 18 at 16:35 GMT

GBP/USD 1.5439 H: 1.5455 L: 1.5341

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5165 1.5282 1.5392 1.5505 1.5642 1.5786

 

  • GBP/USD was flat in the Asian session. The pair posted sharp gains in European trade, pushing past resistance at 1.5392. The pair is unchanged in the North American session.
  • 1.5392 has reverted to a support role following strong gains by the pound and is a weak line. There is stronger support at 1.5282.
  • 1.5505 is a weak resistance line. 1.5642 is stronger.
  • Current range: 1.5392 to 1.5505

Further levels in both directions:

  • Below: 1.5392, 1.5282, 1.5165, 1.5008 and 1.4873
  • Above: 1.5505, 1.5642, 1.5786 and 1.5888

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Wednesday, reversing the trend seen a day earlier. This is not consistent with the pound’s gains, which has led to long positions being covered and thus an increase in the percentage of open short positions. The ratio has a majority of long positions, indicative of trader bias towards the pound continuing to gain ground.

GBP/USD Fundamentals

  • 9:30 British Average Earnings Index. Estimate 1.7%. Actual 2.1%.
  • 9:30 British Claimant Count Change. Estimate -25.2K. Actual -38.6K.
  • 9:30 British Unemployment Rate. Estimate 5.7%. Actual 5.8%.
  • 9:30 MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9.
  • 9:30 MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9.
  • 13:30 US Building Permits. Estimate 1.08M. Actual 1.05M.
  • 13:30 US PPI. Estimate -0.4%. Actual -0.8%.
  • 13:30 US Core PPI. Estimate 0.1%. Actual -0.1%.
  • 13:30 US Housing Starts. Estimate 1.07M. Actual 1.07M.
  • 14:15 US Capacity Utilization Rate. Estimate 79.9%. Actual 79.4%.
  • 14:15 US Industrial Production. Estimate 0.5%. Actual 0.2%.
  • 19:00 US FOMC Meeting Minutes.
  • 21:00 US TIC Long-Term Purchases. US 41.3B.
  • 22:00 US FOMC Member Jerome Powell Speaks.

*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.