GBP/USD – Sharp Losses for Pound, Investor Eye Carney Speech

The British pound has posted sharp losses to kick off the week. In Monday’s North American session, GBP/USD is trading at 1.4035, down 0.91% on the day. On the release front, there are no British events. In the US, Personal Spending slowed to 0.4%, shy of the estimate of 0.6%. On Tuesday, the UK releases Net Lending to Individuals. In the US the key indicator is CB Consumer Confidence and President Trump will deliver the State of the Union address.

The US dollar continues to struggle, and the pound jumped on the bandwagon, jumping 4.0% in January. Last week, GBP/USD pushed above 1.43 for the first time since June 2016. The greenback didn’t get any favors from US Treasury Secretary Steven Mnuchin, who said that the US had no problem with a weak US dollar. That comment pushed the dollar sharply lower, with the pound gaining 1.5% on Wednesday.

The EU has drafted guidelines regarding the transition period after Britain leaves the European Union in 2019. The European proposal calls for Britain to abide by EU rules, including freedom of movement, during the transition period which would last until 2020. However, it’s unlikely that the May government will simply accede to this proposal. Britain wants a longer transition period as well as say in the makeup of the transition period.

In the US, recent GDP releases have pointed to strong growth of 3% or higher. This resulted in some disappointment on Friday, as Advance GDP came in at 2.6%, short of the estimate of 3.0%. The economy grew 2.3% in 2017, compared to 1.6% in 2016. Growth in Q4 was affected by stronger consumer spending, which led to a surge in imports. At the same time, the increase in consumer spending also boosted inflation, as the personal consumption expenditures index, which the Fed prefers to use, rose 1.9% in the fourth quarter, up from 1.3% in Q3. A strong US economy has boosted the manufacturing sector, as durable goods orders in December hit 2.9%, crushing the estimate of 0.6%. This was the highest gain in six months, and helped make 2017 a banner year. Durable good orders increased 5.8% in 2017, the sharpest expansion since 2011.

 

GBP/USD Fundamentals

Monday (January 29)

  • 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
  • 8:30 US Personal Spending. Estimate 0.5%. Actual 0.4%
  • 8:30 US Personal Income. Estimate 0.3%. Actual 0.4%

Tuesday (January 30)

  • 4:30 British Net Lending to Individuals. Estimate 4.8B
  • 10:00 US CB Consumer Confidence. Estimate 123.2
  • 10:30 BoE Governor Mark Carney Speaks
  • 21:00 President Trump Speaks

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, January 29, 2018

GBP/USD January 29 at 12:15 EDT

Open: 1.4164 High: 1.4164 Low: 1.4029 Close: 1.4035

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3809 1.3901 1.4010 1.4128 1.4271 1.4346

GBP/USD showed little movement in the Asian session. The pair posted losses in the European session and this has continued in North American trade

  • 1.4010 is a weak support line. It could break in the North American session
  • 1.4128 is the next line of resistance

Current range: 1.4010 to 1.4128

Further levels in both directions:

  • Below: 1.4010, 1.3901 and 1.3809
  • Above: 1.4128, 1.4271, 1.4346 and 1.4439

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Monday session. Currently, short positions have a majority (59%), indicative of trader bias towards GBP/USD continuing to lose 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.