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GBP/USD – Pound Slips on Gloomy BoE Minutes

GBP/USD has lost ground in the Thursday session. In North American trade, GBP/USD is trading at 1.2881. On the release front, it’s been a very busy day. The Bank of England maintained the benchmark rate at 0.25%, but the minutes of the May policy meeting were pessimistic. There was more bad news as Manufacturing Production declined 0.6%, worse than the forecast of -0.2%. US numbers were strong, as PPI improved to 0.5%, and unemployment claims ticked lower to 236 thousand. Both indicators beat their estimates.

As expected, the BoE made no changes to interest rates or its asset-purchase scheme. However, the BoE stated in its minutes that it expected living standards to drop, as it downgraded its forecast for average earning growth to 2%, down from 3% in February. On the inflation front, the BoE raised its projection for inflation in Q1 to 2.7%, compared to 2.4% in February. The Bank added that if inflation is higher than predicted, it might have to respond by raising interest rates. The minutes added that these forecasts were based on a “smooth” Brexit (which is by no means guaranteed, especially with the bad blood between the EU and Prime Minister Theresa May). Predictably, the gloomy message from the BoE has pushed the British pound lower in Thursday trade. A weak UK manufacturing production report is also weighing on the pound, and if upcoming data also misses expectations, the pound could continue to lose ground.

BoE’s Carney Sees Tougher Time for Households [1]

Washington is in the grips of a major political crisis (some analysts are even calling it a constitutional crisis), following Trump’s firing of FBI director James Comey on Tuesday. Comey, who has been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign, clearly has been a thorn in Trump’s side. The White House has claimed that it fired Comey over his handling of an email scandal involving Hillary Clinton, but the move has been roundly condemned by the Democrats, and some key Republicans have also voiced opposition as well. The firestorm could heat up further, with calls in Congress to appoint an independent investigator into Trump’s connections with Russia. Has Trump gone one step to far? This latest controversy shows no signs of fading away anytime soon, and could delay Trump agenda of tax reform and increased fiscal spending.

 

GBP/USD Fundamentals

Thursday (May 11)

Friday (May 12)

*All release times are EDT

*Key events are in bold

GBP/USD for Thursday, May 11, 2017

GBP/USD May 11 at 12:00 EDT

Open: 1.2938 High: 1.2949 Low: 1.2849 Close: 1.2881

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2571 1.2706 1.2865 1.2946 1.3058 1.3121

Further levels in both directions:

OANDA’s Open Positions Ratio

GBP/USD ratio remains unchanged this week. Currently, short positions have a majority (65%), indicative of trader bias towards GBP/USD continuing to move lower.

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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