GBP/USD – Pound Drops Below 1.30 After Sharp US Jobs Report

The British pound’s slide continues this week. In Tuesday’s North American session, the pair is trading at 1.2961, down 0.56% on the day. On the release front, there are no major British events. BRC Retail Sales Monitor slowed to 0.9%, down from 1.2% in the previous month. In the US, there was positive news on the employment front, as JOLTS Jobs Openings jumped to 6.16 million, well above the estimate of 5.74 million. On Wednesday, the US releases two employment indicators – Preliminary Nonfarm Productivity and US Preliminary Unit Labor Costs.

The pound continues to lose ground, as GBP/USD has slipped 2.0% since August 3. On Tuesday, the pair has dropped below the 1.30 level, following the strong US JOLTS Jobs Openings release. The indicator improved to 6.16 million, marking a record high. This follows the strong nonfarm payrolls report on Friday, as the US labor market remains red-hot. The British currency has also lost ground as investors are skeptical that the BoE will raise interest rates before 2018. The markets are also concerned about the health of the British economy, with the BoE recently lowering its inflation and growth forecasts.

Investor appetite for the US dollar has softened, as political risk has been growing and there are doubts if the Fed will raise rates before 2018. President Trump’s administration seems rudderless and Trump’s inability to pass healthcare legislation has increased political risk in the US. As well, the Federal Reserve’s monetary policy remains unclear. Earlier this year the Fed strongly hinted that it planned to raise rates three times in 2017, but has only pressed the rate trigger twice. In June, Fed Chair Janet Yellen shrugged off low inflation, saying that it was due to “transient” factors, leaving the impression that the Fed still planned one final hike. However, inflation has not improved and the Fed has changed its tune. Last week, St. Louis Federal Reserve President James Bullard said he opposed further Fed hikes, warning that another hike would actually delay inflation from hitting the Fed’s target of 2%. The markets have become more skeptical about a rate hike in December, as the odds have fallen to 33%, compared to 43% a week ago.

GBP/USD Fundamentals

Monday (August 7)

• 19:01 British BRC Retail Sales Monitor. Actual 0.9%

Tuesday (August 8)

• 6:00 US NFIB Small Business Index. Estimate 103.6. Actual 105.2
• 10:00 US JOLTS Job Openings. Estimate 5.74M. Actual 6.16M
• 10:00 US IBD/TIPP Economic Optimism. Estimate 50.6. Actual 52.2

Wednesday (August 9)

• 8:30 US Preliminary Nonfarm Productivity. Estimate 0.7%
• 8:30 US Preliminary Unit Labor Costs. Estimate 1.1%

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, August 8, 2017

GBP/USD August 8 at 11:45 EDT

Open: 1.3051 High: 1.3054 Low: 1.2953 Close: 1.2966

GBP/USD Technical

• GBP/USD recorded small gains in the Asian session. The pair reversed directions and lost ground in European trade. The downward trend has continued in North American trade
• 1.2946 is providing weak support
• 1.3058 has strengthened following strong losses by GBP/USD in the Tuesday session

Further levels in both directions:

• Below: 1.2946, 1.2865 and 1.2767
• Above: 1.3058, 1.3121, 1.3238 and 1.3347
• Current range: 1.2946 to 1.3058

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Tuesday session. Currently, long positions have a majority (60%), indicative of trader bias towards GBP/USD reversing directions 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.