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GBP/USD – Pound Unmoved by Solid GDP in Q2

It’s been an uneventful week for the pound, which continues to trade quietly in the Friday session. Currently, GBP/USD is trading at 1.2980. On the release front, there a host of releases from the UK and the US. Britain’s current account deficit narrowed to GBP 28.7 billion, while Final GDP posted a gain of 0.7%, edging above the forecast of 0.6%. In the US, Friday’s highlight is UoM Consumer Sentiment, with the markets predicting a strong reading of 90.1 points.

British Final GDP posted a respectable gain of 0.7% in the second quarter. This was slightly higher than Second Estimate GDP, which showed a gain of 0.6%. This release covers the 3-month period up to the Brexit vote in late June, so the real test for the economy will be third quarter GDP. British Current Account also looked solid in the second quarter, as the current account deficit narrowed to 3-month lows. The BoE has sent out the alarm regarding economic fallout from Brexit, but so far British indicators for Q3 have posted stronger numbers than expected. If this positive trend continues into autumn, the British pound, which plunged after the Brexit vote in June, could recover some ground against the dollar.

US Final GDP expanded 1.4% in the second quarter, revised from the preliminary estimate of 1.1% [1]. Consumer spending has been strong, making up for sluggish business investment and weaker demand for US exports. The US consumer is optimistic about the economy, as underscored by recent CB consumer confidence surveys, which have been above the 100-level for two months running. On the labor front, unemployment claims came in at 254 thousand, marking the eighth straight week that jobless claims have come in below the forecast.

The US consumer is feeling good about the economy, according to recent consumer confidence indicators. The CB Consumer Confidence jumped to 104.1 points in September, much higher than the forecast of 98.6 points. This excellent release improved upon a strong August report of 101.1 points. Will the upward trend continue with UoM Consumer Sentiment? Stronger consumer confidence often translates into increased spending by consumers, which is vital for economic growth. If upcoming consumer spending numbers also move higher, the likelihood of a December hike will likely increase. Currently, the markets have priced in a quarter-point hike in December at 48 percent.

GBP/USD Fundamentals

Friday (September 30)

*All release times are EDT

* Key events are in bold

GBP/USD for Friday, September 30, 2016

GBP/USD September 30 at 9:10 EDT

Open: 1.2964 High: 1.2992 Low: 1.2936 Close: 1.2977

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2612 1.2778 1.2899 1.3033 1.3142 1.3219

Further levels in both directions:

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement in the Friday session, consistent with the lack of activity from GBP/USD. Currently, long positions have a strong majority (74%). This is 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 [5]

Market Analyst at OANDA [6]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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