GBP/USD – Pound Pushes Above 1.23, British Retail Sales Next

The British pound is up slightly in the Thursday session. Currently, GBP/USD is trading just above the 1.23 level. On the release front, there was positive news out of the US as manufacturing and employment reports easily beat expectations. Building Permits were within expectations. There are no British events on the schedule. Friday is Inauguration Day in the US, and the markets will be closely monitoring President-elect Trump’s inaugural address to the nation. The UK will release Retail Sales, with the markets braced for a decline of 0.1%.

The pound has shown signs of recovery and is poised to have a winning week for the first time in 2017. The currency jumped 2.9% on Tuesday, after Prime Minister’s May landmark speech on Brexit. In her remarks, May confirmed that Britain would no longer enjoy access to Europe’s common market, but would assume full control over its borders and immigration policy. She said that Britain was not looking for a “half-in, half out” relationship with the EU, and Britain would seek free-trade deals with Europe and countries around the world. May intends to begin Brexit negotiations with Europe in March and has set a two-year time frame for an agreement to be reached. Many European leaders were decidedly cool towards the speech, but Germany’s foreign minister acknowledged that May had finally clarified Britain’s stance on Brexit. The pound soared after the speech, mainly on May’s reassurance that any agreement would be subject to the approval of both houses of parliament. The British currency was also buoyed by solid UK inflation data. CPI, the primary gauge of consumer inflation, climbed 1.6%, its highest level since July 2014. On Monday, BoE Governor Mark Carney said that higher inflation the country is experiencing will take a toll on wages and consumer spending. Carney didn’t shed any light on future monetary policy, saying that interest rates could move in either direction in the months ahead. Still, the BoE will want to keep a lid on inflation and could raise rates in order to do so. The bank has projected an inflation rate of 2.7% in 2017, but some experts are forecasting inflation levels closer to 4 percent.

As Donald Trump is about to be sworn in as president, there is a feeling of unease in the air, despite a robust US economy. Trump’s upset election victory in November was warmly received by the markets, as the US stock market and the US dollar have climbed higher. However, confidence and hope are starting to give way to confusion and uncertainty, as Trump has failed to outline any specifics on his economic policies, while continuing to tangle with the media and fire off controversial Twitter messages. Trump’s comments earlier this week about the US dollar helped send the currency lower. In an interview with the Wall Street Journal on Monday, Trump complained that the currency was “too strong”. These sentiments were echoed on Tuesday by Trump advisor Anthony Scaramucci. Speaking at the World Economic Forum in Davos, Scaramucci warned that “we must be careful of a rising dollar.” Trump broke with the unwritten rule that US presidents refraining from commenting on the US dollar, and his comments could be a taste of more to come, as Trump is unlikely to veer from his habit of making controversial comments that could affect market movement.

May Warns of Momentous Change For Britain

GBP/USD Fundamentals

Thursday (January 19)

• 8:30 US Building Permits. Estimate 1.22M. Actual 1.21M
• 8:30 US Philly Fed Manufacturing Index. Estimate 16.3. Actual 23.6
• 8:30 US Unemployment Claims. Estimate 252K. Actual 234K
• 8:30 US Housing Starts. Estimate 1.19M. Actual 1.23M
• 10:30 US Natural Gas Storage. Estimate -235B. Actual -243B
• 11:00 US Crude Oil Inventories. Estimate 0.1M. Actual 2.3M
• 20:00 US Fed Chair Yellen Speech

Upcoming Key Events

Friday (January 20)

• 4:30 British Retail Sales. Estimate -0.1%
• Tentative – President Trump Speech

*All release times are EST

* Key events are in bold

GBP/USD for Thursday, January 19, 2017

GBP/USD January 19 at 11:20 EST

Open: 1.2259 High: 1.2341 Low: 1.2250 Close: 1.2308

GBP/USD Technical

• GBP/USD has posted slight gains in the Asian and European sessions. The pair has ticked lower in North American trade
• 1.2272 has switched to a support role following gains by GBP/USD in the Thursday session
• 1.2351 is the next resistance line

Further levels in both directions:

• Below: 1.2272, 1.2111, 1.1943 and 1.1844
• Above: 1.2351, 1.2471 and 1.2579
• Current range: 1.2272 to 1.2351

OANDA’s Open Positions Ratio

GBP/USD ratio has reversed directions and is showing gains toward long positions. Currently, long positions have a majority (63%), 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.