GBP/USD – Pound Ticks Higher, US Industrial Indicators Beat Expectations

The British pound continues to trade sideways. In Wednesday’s North American trade, GBP/USD is trading at 1.3804, up 0.09% on the day. In economic news, there are no major British indicators. In the US, there was positive news on the manufacturing front. Capacity Utilization improved to 77.9%, beating the estimate of 77.3%. This marked the highest level since July 2014. On Thursday, there are a host of key indicators out of the US, led by Building Permits and unemployment claims.

Inflation in the UK edged lower in December, dropping from 3.1% to 3.0%. Still, that is still much higher than the Bank of England target of 2 percent. The BoE finds itself in a tough spot with regard to interest rate policy. The Bank is reluctant to raise rates, especially with the uncertainties over Brexit, but high inflation continues to erode the purchasing power of the British consumer. A weak pound has further dampened consumer spending, although a cheaper pound has been a boon for the export sector. The BoE holds its next policy meeting in February, and as matters currently stand, the BoE is not expected to raise rates.

The financial sector in the UK is expected to take a hit when Britain departs the European Union, and many foreign banks with operations in London are looking at setting up shop on the continent. The Bank of England is trying to help, and in December, the Bank said that it would exempt European bank branches in London from costly capital rules after Brexit, if the EU co-operated with the BoE. On Tuesday, BoE Deputy Governor Sam Woods told a parliamentary committee that the BoE urgently need more clarity on Brexit. Woods stated that foreign banks in London would accelerate their move to the continent, if there is no Brexit transition deal in place by the end of March. This could be very tall order, as negotiations have not gone well between Britain and the EU.

GBP/USD Fundamentals

Wednesday (January 17)

  • 6:45 BoE Member Michael Saunders Speaks
  • 9:15 US Capacity Utilization Rate. Estimate 77.3%. Actual 77.9%
  • 9:15 US Industrial Production. Estimate 0.3%
  • 10:00 US NAHB Housing Market Index. Estimate 73
  • 14:00 US Beige Book
  • 16:00 US TIC Long-Term Purchases. Estimate 50.1B
  • 16:30 US FOMC Member Loretta Mester Speaks
  • 19:01 British RICS House Price Balance. Estimate -1%

Thursday (January 18)

  • 8:30 US Building Permits. Estimate 1.29M
  • 8:30 US Housing Starts. Estimate 1.28M
  • 8:30 US Philly Fed Manufacturing Index. Estimate 24.9
  • 8:30 US Unemployment Claims. Estimate 250K

*All release times are GMT

*Key events are in bold

GBP/USD for Wednesday, January 17, 2018

GBP/USD January 17 at 10:15 EDT

Open: 1.3791 High: 1.3837 Low: 1.3756 Close: 1.3804

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3402 1.3503 1.3655 1.3809 1.3901 1.4010

In the Asian session, GBP/USD edged higher but then retracted. The pair has shown limited movement in the European and North American sessions

  • 1.3655 is providing support
  • 1.3655 was tested earlier in resistance. This line is under pressure and could see more action in the North American session

Current range: 1.3503 to 1.3655

Further levels in both directions:

  • Below: 1.3655, 1.3503, 1.3402 and 1.3221
  • Above: 1.3809, 1.3901 and 1.4010

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Wednesday session. Currently, short positions have a majority (59%), indicative of trader bias towards GBP/USD reversing directions and moving to lower 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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.