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GBP/USD – Pound Dips as UK Current Account Deficit Ballons

The British pound has recorded losses on Friday, erasing the gains which marked the Thursday session. Currently, GBP/USD is trading at 1.3389, down 0.39% on the day. On the release front, it’s a busy day, with multiple releases in the both the UK and US. The UK’s current account deficit widened significantly in the second quarter, climbing to GBP 23.2 billion. This was much higher than the forecast of GBP 15.8 billion. Britain’s GDP expanded 0.35% in the second quarter, matching the estimate. In the US, we’ll get a look at two key indicators, Personal Spending and UoM Consumer Sentiment.

The negotiations between Britain and the European Union over the terms of Britain’s withdrawal from the EU have been tortuous until now, with little progress to report after several rounds of negotiations. Key sticking points include the amount that Britain will pay upon leaving, whether the European High Court will have jurisdiction over EU citizens living in Britain, and the border with Ireland. British Prime Minister May has been keen to discuss trade relations with the continent, but the Europeans have insisted on first making progress on the other issues. However, the tone of the talks has improved recently, as Prime Minister May’s conciliatory speech in Florence was received positively in Europe, although large gaps still remain between the two sides.

The US economy received strong marks on its report card for Q2, as Final GDP posted an impressive gain of 3.1%. This figure was revised upwards from the second estimate of 3.0% in August. The strong reading is being taken with some caution, however, as third quarter economic numbers could soften, due to the tremendous damage caused by hurricanes Harvey and Irma, which caused a slowdown in economic activity. The recent hurricanes have also impacted on the labor market, pushing unemployment numbers higher. Still, the US labor market remains strong, as underscored by unemployment rolls which have remained below the 300,000 level.

Donald Trump hasn’t had any luck with his health care plan, which barely passed in the House of Representatives and appears doomed in the Senate, despite a Republican majority in both houses. The US president has now set his sights on tax reform, another key campaign platform. On Wednesday, Trump proposed a major overhaul of the US tax code, which includes reducing the corporate tax rate from 35 percent to 20 percent, as well as 25 percent tax rate for small businesses, such as partnerships. Like other Trump proposals, the tax plan was sketchy on details, including how the tax plan would be paid for. With Democrats and some Republicans wary of Trump, it’s likely that tax reform will face a stiff battle in Congress.

 

GBP/USD Fundamentals

Friday (September 29)

*All release times are GMT

*Key events are in bold

 

GBP/USD for Friday, September 29, 2017

GBP/USD September 29 at 7:30 EDT

Open: 1.3442 High: 1.3444 Low: 1.3353 Close: 1.3389

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3121 1.3224 1.3347 1.3444 1.3514 1.3667

GBP/USD edged lower in the Asian session and continues to lose ground in European trade

Further levels in both directions:

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Friday session. Currently, short positions have a majority (62%), indicative of trader bias towards GBP/USD reversing directions and moving to higher ground.

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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