GBP/USD has ticked lower in the Tuesday session. In North American trade, the pair is trading slightly above the 1.27 line. On the release front, it’s a quiet day, with no major indicators out of the UK or the US. On Wednesday, the UK releases Manufacturing Production, a key event. The markets are expecting the indicator to drop to 0.2%.
The pound punched above the 1.27 line on Monday, following 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. British Prime Minister Theresa May wants Brexit negotiations to start in March, and EU chief negotiator Michel Barnier said on Tuesday that if this happens, the EU’s target date to reach an agreement is October 2018.
The spotlight was on US employment numbers on Friday and the readings were mixed. 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 decrease in labor market slack is likely to put more pressure on inflation levels, which remain weak despite a strong economy. Preliminary GDP expanded at a clip of 3.2% in the third quarter, beating the estimate of 3.0%.
Tuesday (December 6)
- 4:30 British FPC Meeting Minutes
- 5:40 British 10-year Bond Auction. Actual 1.39%
- 8:30 US Revised Nonfarm Productivity. Estimate 3.2%. Estimate 3.1%
- 8:30 US Trade Balance. Estimate -41.5B. Actual -42.6B
- 8:30 US Revised Unit Labor Costs. Estimate 0.4%. Actual 0.7%
- 10:00 US Factory Orders. Estimate 2.5%
- 10:00 US IBD/TIPP Economic Optimism. Estimate 52.3
Wednesday (December 7)
- 4:30 British Manufacturing Production. Estimate 0.2%
*All release times are EST
* Key events are in bold
GBP/USD for Tuesday, December 6, 2016
GBP/USD December 6 at 11:00 EST
Open: 1.2726 High: 1.2775 Low: 1.2699 Close: 1.2714
- GBP/USD showed limited movement in the Asian and European sessions. In the North American session, the pair posted small gains but has retracted
- 1.2620 is providing support
- 1.2778 is the next resistance line
Further levels in both directions:
- Below: 1.2620, 1.2471, 1.2351 and 1.2272
- Above: 1.2778, 1.2849 and 1.2946
- Current range: 1.2620 to 1.2778
OANDA’s Open Positions Ratio
GBP/USD ratio is unchanged in the Tuesday session. Currently, long positions have a majority (61%), indicative of trader bias towards GBP/USD breaking out and moving 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.