GBP/USD – Pound Dips as Powell Pushes Dollar Higher

The British pound has posted losses in the Tuesday session. In North American trade, GBP/USD is trading at 1.3925, down 0.28% on the day. In economic news, Federal Reserve Chair Jerome Powell made his first appearance before Congress. Meanwhile, durable goods reports were dismal. Core Durable Goods declined 0.3%, short of the estimate of +0.4%. This marked the second decline in three months. Durable Goods plunged 3.7%, missing the estimate of -2.4%. This reading was the sharpest decline since July. There was better news from CB Consumer Confidence, which improved to 130.8, well above the estimate of 126.2 points. Later in the day, the UK releases BRC Shop Price Index and GfK Consumer Confidence. On Wednesday, the US releases Preliminary GDP, with an estimate of 2.5%.

There were no dramatic moments during Jerome Powell’s testimony before a congressional committee on Tuesday. Powell was cautious, saying that the Fed planned to continue its current policy of gradual rate increases, despite the stimulus of government spending and recent tax reform. Powell sounded optimistic about economic conditions, noting that the US economy was benefiting from the global recovery as well as changes in fiscal policy. Importantly, Powell did not address the question of an acceleration of rate hikes. Currently, the Fed has projected three rate hikes in 2018, with a March hike priced in at 87%, according to the CME’s Fed Watch. However, with inflation moving higher and the economy continuing to perform well, many analysts expect the Fed to raise rates four or more times this year. Any hints at an increased pace of rate hikes could send the US dollar broadly higher.

Brexit negotiations have been bumpy from the start, but matters seem to be deteriorating almost daily. Prime Minister May is in a tough spot, with the Europeans dismissing her latest proposals on a trade deal after Brexit, and many members of her party supporting playing hard with Europe. May has proposed that a trade deal would allow some divergence with EU regulations in certain industries, but the Europeans have dismissed this as ‘cherry picking’, which they say is a non-starter. May will lay out her post-Brexit vision of relations with the EU in a speech on Friday and if the Europeans pour cold water on her plan, the markets could react negatively.

GBP/USD Fundamentals

Tuesday (February 27)

• 8:30 US Fed Chair Jerome Powell Testifies
• 8:30 US Core Durable Goods Orders. Estimate +0.4%. Actual -0.3%
• 8:30 US Fed Chair Jerome Powell Testifies
• 8:30 US Durable Goods Orders. Estimate -2.4%. Actual -3.7%
• 8:30 US Goods Trade Balance. Estimate -72.3B. Actual -74.4B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.3%. Actual 0.7%
• 9:00 US HPI. Estimate 0.4%. Actual 0.3%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 6.3%. Actual 6.3%
• 10:00 US CB Consumer Confidence. Estimate 126.2. Actual 130.8
• 10:00 US Richmond Manufacturing Index. Estimate 15. Actual 28
• 19:01 British BRC Shop Price Index
• 19:01 British Gfk Consumer Confidence. Estimate -10

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, February 27, 2018

GBP/USD February 27 at 12:55 EDT

Open: 1.3965 High: 1.3996 Low: 1.3858 Close: 1.3925

GBP/USD Technical

GBP/USD was flat in the Asian session and posted losses in European trade. In the North American session, the pair recorded further losses but has mostly recovered these losses

• 1.3901 is a weak support level
• 1.4010 is the next resistance line

Current range: 1.3901 to 1.4010

Further levels in both directions:

• Below: 1.3901, 1.3809 and 1.3744
• Above: 1.4010, 1.4128, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

In the Tuesday session, GBP/USD ratio is showing slight movement towards short positions. This is indicative of trader bias towards GBP/USD continuing to move 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.