GBP/USD – Pound Edges Lower After Mixed UK Job Numbers

GBP/USD is slightly lower on Wednesday, following sharp losses in the Tuesday session. In the North American session, the pair is trading at 1.3160. On the release front, the UK released key employment numbers. The Average Earnings Index remained steady at 2.3%, above the forecast of 2.1%. Claimant Count Change rose 2.4 thousand, higher than the forecast of 1.7 thousand. The unemployment rate remained pegged at 4.9%, matching the forecast. In the US, there are no major events on the schedule. US Import Prices dropped 0.1%, its first decline in six months. Thursday is data-heavy, so traders should be prepared for stronger movement from GBP/USD. The UK will release retail sales and the Bank of England will announce the benchmark interest rate. In the US, the key events include retail sales and unemployment claims.

British employment numbers in August were mixed on Wednesday. Wage growth remained steady at 2.3%, but jobless claims were higher than expected. Along with a low unemployment rate of 4.9%, these are certainly respectable numbers. Third quarter data has been better than expected, but the markets remain nervous about a Brexit fallout. This was underscored on Tuesday, when the pound slid 130 points after CPI came in at 0.6%, just shy of the forecast of 0.7%. The BoE will be in the spotlight on Thursday, with the setting of the benchmark interest rate and asset-purchase levels. In August, the bank took firm action in response to the Brexit vote, slashing rates to 0.25%, the first cut since 2009. The bank also significantly expanded its asset-purchase scheme to 435 billion pounds. With the economy looking solid in the third quarter, the BoE has some breathing room and is expected to remain on the sidelines on Thursday.

With a September rate hike unlikely but still on the table, the markets have been paying close attention to comments from FOMC members in connection with the Fed’s monetary policy. On Monday, FOMC member Lael Brainard sounded cautious, saying it would be prudent to maintain a loose monetary policy. Brainard noted global uncertainties and weak inflation as reasons for the Fed not to rush into raising rates. This dovish message was in marked contrast to remarks from FOMC member Eric Rosengren last week, who came out in support of a rate hike, without providing a timeline. Rosengren said that “tightening is likely to be appropriate”, and went as far as to say that the US economy could overheat if the Fed didn’t act soon. These mixed messages certainly haven’t clarified matters, leaving markets players in the dark as to the Fed’s monetary plans with a week to go before a crucial Fed policy meeting. The markets have had few fundamental cues to work with so far this week, but that will change on Thursday, as the US releases retail sales, PPI, the Philly Fed Manufacturing Index and unemployment claims. If these numbers are stronger than expected, speculation about a September hike will rise and the US dollar could gain ground.

GBP/USD Fundamentals

Wednesday (September 14)

• 4:30 British Average Earnings Index. Estimate 2.1%. Actual 2.3%
• 4:30 British Claimant Count Change. Estimate 1.7K. Actual 2.4K 
• 4:30 British Unemployment Rate. Estimate 4.9%. Actual 4.9%
• 8:30 US Import Prices. Estimate -0.2%. Actual +0.1%
• 10:30 US Crude Oil Inventories. Estimate 2.8M

Upcoming Key Events

Thursday (September 15)

• 4:30 British Retail Sales. Estimate -0.4%
• 7:00 MPC Official Bank Rate Votes. Estimate 0-0-9
• 7:00 BoE Monetary Policy Summary
• 7:00 BoE Official Bank Rate. Estimate 0.25%
• 8:30 US Core Retail Sales. Estimate 0.3%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Philly Fed Manufacturing Index. Estimate 1.1
• 8:30 US Retail Sales. Estimate -0.1%
• 8:30 US Unemployment Claims. Estimate 262K

*All release times are EDT

* Key events are in bold

GBP/USD for Wednesday, September 14, 2016

GBP/USD September 14 at 10:25 EDT

Open: 1.3191 High: 1.3228 Low: 1.3137 Close: 1.3165

GBP/USD Technical

• GBP/USD showed limited movement in the Asian session. The pair has been marked by choppy trading in the European and North American sessions
• 1.3219 was tested earlier in resistance. It is an immediate line
• 1.3142 is under pressure in support and could see further action in the North American session

Further levels in both directions:

• Below: 1.3142, 1.3033 and 1.2899
• Above: 1.3219, 1.3327, 1.3480 and 1.3667
• Current range: 1.3142 to 1.3219

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement on Wednesday, consistent with the lack of movement from GBP/USD. Currently, long positions have a majority (54%), indicative of trader bias towards GBP/USD reversing directions and moving higher.

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.