GBP/USD – Pound Higher Despite Drop in US Jobless Claims

GBP/USD has posted considerable gains on Thursday, continuing the upwards movement in the Wednesday session. In North American trade, the pair is trading just above the 1.31 line. In the UK, the BoE released its Financial Policy Committee statement. CBI Industrial Order Expectations was unchanged at minus -5, matching the forecast. Later in the day, BoE Governor Mark Carney will speak at an event in Berlin. In the US, unemployment claims dropped to 252 thousand, well below the forecast of 261 thousand. However, existing home sales fell to 5.33 million, short of the estimate of 54.5 million.

The BoE released its FPC statement on Thursday, and the bank’s message appeared directed at the EU as much as at domestic lenders. The BoE warned that it would not relax bank capital rules in the aftermath of the Brexit vote. In a clear reference to Brexit, the statement noted that the UK “faces a challenging period of uncertainty and adjustment”. This stern message is consistent with the significant monetary moves that the BoE adopted in August, when it lowered interest rates for the first time in nine years and expanded its asset-purchase program. The BoE has strongly hinted that it is leaning towards another rate cut in November, even though third quarter data has been better than expected.

All eyes were on the Federal Reserve announcement on Wednesday. As widely expected, the bank maintained the benchmark interest rate at 0.25%, where it has been pegged since last December. In a highly unusual step, however, three of the ten FOMC members dissented with the decision. Esther George, Loretta Mester and Eric Rosengren voted against holding rates steady, preferring to raise rates immediately by a quarter-percentage point. This was the first time since December 2014 that three FOMC voting members have dissented with the Fed rate decision. This significant dissent underscores that Janet Yellen has been unable to “rally the troops” behind her leadership, with one economist calling the Fed decision “one of the most decisive FOMC meetings in recent memory”.

The Fed statement noted strong growth in employment and consumer spending, but added that business fixed investment remains weak. The Fed’s “dot plot” indicated that policymakers expect a quarter-rate hike before the end of the year. The Fed’s current stance is being called a “hawkish hold” as the Fed has put the markets on notice that a December rate hike is likely. Using typically bland language, the Fed stated that “the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Reading between the lines, the Fed is looking for stronger inflation numbers, and upcoming inflation indicators (as well as consumer spending and employment) will have a significant impact on the odds of a December rate hike. The Fed sounded dovish about future rate moves, scaling back projections for 2017 from three to two hikes.

GBP/USD Fundamentals

Thursday (September 22)

  • 4:30 BoE Financial Policy Committee Statement
  • 6:00 CBI Industrial Order Expectations. Estimate minus -5. Actual minus-5
  • 8:00 External BOE MPC Member Kristin Forbes Speaks
  • 8:30 US Unemployment Claims. Estimate 261K. Actual 252K
  • 9:00 US HPI. Estimate 0.3%. Actual 0.5%
  • 9:30 BOE Deputy Governor Jon Cunliffe Speaks
  • 10:00 US Existing Home Sales. Estimate 5.45M. Actual 5.33M
  • 10:00 US CB Leading Index. Estimate 0.0%. Actual -0.2%
  • 10:30 US Natural Gas Storage. Estimate 59B. Actual 52B
  • 13:10 BoE Governor Mark Carney Speaks

*All release times are EDT

* Key events are in bold

GBP/USD for Thursday, September 22, 2016

GBP/USD September 22 at 11:15 EDT

Open: 1.3032 High: 1.3121 Low: 1.3029 Close: 1.3108

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2778 1.2889 1.3033 1.3142 1.3219 1.3327
  • GBP/USD posted small gains in the Asian and European sessions. The upward movement continue in North American trade
  • There is resistance at 1.3142
  • 1.3033 has switched to support following gains by GBP/USD in the Thursday session

Further levels in both directions:

  • Below: 1.3033, 1.2899, 1.2778 and 1.2612
  • Above: 1.3142, 1.3219 and 1.3327
  • Current range: 1.3033 to 1.3142

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Thursday session. Currently, long positions have a strong majority (70%), indicative of trader bias towards GBP/USD continuing to move to higher ground.

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.
Kenny Fisher

Latest posts by Kenny Fisher (see all)