GBP/USD – Pound Yawns as Construction PMI Beats Expectations

The British pound has ticked higher in the Monday session. In North American trade, GBP/USD is trading at 1.3455. On the release front, British Construction PMI in November looked sharp, accelerating to 53.1 points, above the forecast of 51.2 points. This marked the highest level since June. In the US, Factory Orders declined 0.1%, the first decline since July. Still, this beat the forecast of -0.3%. On Tuesday, the UK releases Services PMI, which is forecast to dip to 55.2 points. The US publishes ISM Non-Manufacturing PMI, with the markets expecting the indicator to slow to 59.2 points.

After sweetening the British offer over its Brexit bill last week, Prime Minister Theresa May is anxious to change the focus of the Brexit negotiations and talk trade with Europe. Prime Minister May and European Commission President Jean-Claude Juckner met earlier on Monday in Brussels, hoping to move closer to wrapping up the first phase of the talks. May has moved closer to the European’s demands on a divorce bill of around EUR 50 billion, but two items have yet to be resolved. One is the border between the UK (Northern Ireland) and Ireland, which is a member of the EU. The UK will clearly not remain in a customs union with the EU, but Ireland is insistent that there not be a hard border. The second issue is whether the European Court of Justice will have a role protecting European citizens in the UK. The EU is in favor of a role for the court, while many British lawmakers feel that such a move would impinge on British sovereignty.

President Trump has asked lawmakers in Washington for a tax reform bill for Christmas, and Congress, at least on the Republican aisle, appears to be in a giving mood. After a false start and some anxious hours on Friday, the US Senate passed a tax reform bill on the weekend. The vote was a squeaker, with 51 Republicans voting yes, against 48 Democrats and 1 Republican. The Senate vote is a big win for President Trump, as tax reform would mark his first major legislative bill in office, after a stinging defeat in trying to pass a new health care bill. The Senate and House must now reconcile their two tax bills, and the new uniform bill will then have be passed in both houses. Investors are pleased with the legislation, and the dollar and the stock markets could continue to gain as a result of positive market sentiment.

GBP/USD Fundamentals

Monday (December 4)

• 4:30 British Construction PMI. Estimate 51.2. Actual 53.1
• 10:00 US Factory Orders. Estimate -0.3%. Actual -0.1%
• 19:01 British BRC Retail Sales Monitor

Tuesday (December 5)

• 4:30 British Services PMI. Estimate 55.2
• 10:00 US ISM Non-Manufacturing PMI. Estimate 59.2

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, December 4, 2017

GBP/USD December 4 at 12:40 EDT

Open: 1.3434 High: 1.3539 Low: 1.3414 Close: 1.3456

GBP/USD Technical

GBP/USD showed little movement in the Asian session. In European trade, the pair dipped lower but then reversed directions and posted considerable gains. GBP/USD has lost ground in the North American session.

• 1.3402 is providing support
• 1.3503 is the next resistance line

Further levels in both directions:

• Below: 1.3402, 1.3321 and 1.3186
• Above: 1.3503, 1.3655, 1.3809 and 1.3901
• Current range: 1.3402 to 1.3503

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing short positions with a majority (55%). This is indicative of trader bias towards GBP/USD reversing directions and moving 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.