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GBP/USD – Pound Rally Continues as Services PMI Rises

GBP/USD has posted gains in the Monday session, continuing the upward trend we saw on Friday. In the North American session, the pair is trading at the 1.27 line. On the release front, British Services PMI improved to 55.2 points, beating the estimate of 54.2 points. Later in the day, the UK releases BRC Retail Sales Monitor. In the US, ISM Non-Manufacturing PMI jumped to 57.2, beating the forecast of 55.3.

The pound continues to drive higher, after posting impressive gains of 1.9 percent last week. British Services PMI climbed to 55.2 in November, indicative of a strengthening services sector. This marked its highest level since January. Last week, Manufacturing and Construction PMIs both indicated expansion in their respective sectors. Fourth quarter numbers have been respectable, as economic indicators continue to defy the doomsayers who predicted that the Brexit vote would severely hurt the economy. Still, there are rough seas ahead, as Britain must negotiate the terms of its departure from the European Union, in what could easily descend into a nasty divorce. Last week, Brexit Minister David Davis sent the markets a reassuring message, stating that Britain would consider paying for access to the European single market.

Employment numbers were on center stage on Friday, as the US released key employment indicators. In the US, the numbers were a mix. Nonfarm Payrolls improved to 178 thousand, edging above the forecast of 177 thousand. This marked a 4-month high. However, Average Hourly Earnings, which measures wage growth, surprised with a decline of 0.1%, short of the estimate of 0.2%. This was the first decline in wage growth since March. The unemployment rate dropped to just 4.6%, well below the forecast of 4.9%. The strong labor market has been a key factor in the strong US economy, which saw GDP grow at a clip of 3.2% in the third quarter.

GBP/USD Fundamentals

Sunday (December 4)

Monday (December 5)

*All release times are EST

* Key events are in bold

GBP/USD for Monday, December 5, 2016

GBP/USD December 5 at 11:05 EST

Open: 1.2669 High: 1.2774 Low: 1.2652 Close: 1.2705

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2351 1.2471 1.2620 1.2778 1.2849 1.2946

Further levels in both directions:

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Monday session. Currently, long positions have a majority (61%), indicative of trader bias towards GBP/USD continuing to move upwards.

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 [4]

Market Analyst at OANDA [5]
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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