The British pound has headed lower in the Thursday session. In North American trade, GBP/USD is trading at 1.4091, down 0.36% on the day. On the release front, British Retail Sales impressed with a strong gain of 0.8%, beating the estimate of 0.4%. As expected, the Bank of England maintained the benchmark rate at 0.50%. In the US, unemployment claims rose to 229 thousand, higher than the forecast of 225 thousand. On Friday, the US releases durable goods and housing reports.
The Bank of England kept interest rates at 0.50% at its policy meeting on Wednesday. The markets were expecting this, with investors anticipating a rate move at the May moving. This sentiment has gained traction, following the release of the votes cast by MPC members. The markets had expected a unanimous decision to maintain rates at 0.50%, but two of the nine members voted in favor of immediately raising rates. The language of policymakers has become increasingly hawkish, and the MPC vote is another signal that there is a strong likelihood that the BoE will press the rate trigger come May. Earlier in the week, CPI, the primary gauge of consumer inflation, dropped to 2.7% in February. This is good news for consumers, who have seen their purchasing power steadily deteriorate, with inflation levels of around 3% in recent months.
On Wednesday, the Federal Reserve raised rates for the first time this year, in a move that was widely expected. The rate increase of a quarter-point brings the benchmark rate to a range between 1.50% and 1.75%. The markets were looking for any clues with regard to the pace of rate hikes in 2018 – currently the Fed is projecting three hikes, but a robust US economy could push the Fed to press the rate trigger four times. The rate statement did not directly address the issue, but there was a refreshing lack of Fedspeak from policymakers, who said that “the economic outlook has strengthened in recent months”. This phrase has not been used in previous rate statements, and if Fed policymakers reiterate positive sentiment towards the economy, could push the US dollar to higher ground.
Thursday (March 22)
- 5:30 British Retail Sales. Estimate 0.8%. Actual 0.4%
- 8:00 Official Bank Rate. Estimate 0.50%. Actual 0.50%
- 8:00 MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 2-0-7
- 8:30 US Unemployment Claims. Estimate 225K. Actual 229K
- 9:00 US HPI. Estimate 0.4%. Actual 0.8%
- 9:45 US Flash Manufacturing PMI. Estimate 55.4. Actual 55.7
- 9:45 US Flash Services PMI. Estimate 55.9. Actual 54.1
- 10:00 US CB Leading Index. Estimate 0.5%. Actual 0.6%
- 10:30 US Natural Gas Storage. Estimate -88B. Actual -86B
Friday (March 23)
- 8:30 US Core Durable Goods Orders. Estimate 0.5%
- 8:30 US Durable Goods Orders. Estimate 1.6%
- 10:00 US New Home Sales. Estimate 621K
*All release times are GMT
*Key events are in bold
GBP/USD for Thursday, March 22, 2018
GBP/USD March 22 at 12:20 EDT
Open: 1.4142 High: 1.4220 Low: 1.4077 Close: 1.4091
GBP/USD edged lower in the Asian session but recovered in European trade. The pair has resumed its downward movement in the North American session
- 1.4010 is the next support level
- 1.4128 was tested in resistance earlier. It remains a weak line
- Current range: 1.4010 to 1.4128
Further levels in both directions:
- Below: 1.4010, 1.3901, 1.3809 and 1.3744
- Above: 1.4128, 1.4227 and 1.4345
OANDA’s Open Positions Ratio
In the Thursday session, GBP/USD ratio is showing long positions with a majority (53%), indicative of bias towards the pair reversing directions and moving lower.