GBP/USD – Pounds Shrugs off Soft Construction PMI

The British pound has posted small gains in the Wednesday session. In the North American session, GBP/USD is trading at 1.4079, up 0.14% on the day. On the release front, British Construction PMI dropped to 47.0, missing the estimate of 50.9 points. In the US, employment indicators kicked off with ADP Nonfarm Payrolls, and the news was good. The indicator defied expectations and rose in March, climbing to 241 thousand, well above the forecast of 208 thousand. On the services front, ISM Non-manufacturing PMI dropped to 58.8, shy of the estimate of 58.8 points. On Thursday, the UK releases Services PMI and the US will publish unemployment claims.

British construction output contracted in March, the first time that has occurred since  September. However, the decline has been attributed to snow-related disruptions, something that usually affects the US northeast rather than the UK. The unusually wintry weather in March disrupted civil engineering projects, but with employment and business expectation data remaining steady, analysts are expecting a rebound in the April release. Other sectors of the economy are performing well – Manufacturing PMI was almost unchanged at 55.1, and Services PMI is expected at 53.9 points on Thursday.

The tariff spat between China and the US continues, and the growing possibility of a global trade war has the markets seeing red. The Chinese government has fired the latest salvo, announcing 25% tariffs on 106 American products, including soybeans, wheat and motor vehicles. The value of these US exports amounts to some $50 billion – the same value as Chinese exports which have been slapped with tariffs by President Trump. This represents a significant raising of the stakes, and has the markets worried. China’s deputy finance minister has said that a trade war between the two sides would be a ‘lose-lose’, and few investors would disagree with his diagnosis. However, neither Trump nor Chinese President Xi Jinping has blinked so far, and the crisis shows no signs of being resolved anytime soon. As one US analyst wrote this week, “trade wars are easy to start but hard to stop.”

U.S at War: China Retaliates to Trumps Tariffs

GBP/USD Fundamentals

 Wednesday (April 4)

• 4:30 British Construction PMI. Estimate 50.9. Actual 47.0 
• 8:15 US ADP Nonfarm Employment Change. Estimate 208K. Actual 241K
• 9:45 US Final Services PMI. Estimate 54.3. Actual 54.0
• 10:00 US ISM Non-Manufacturing PMI. Estimate 59.0. Actual 58.8
• 10:00 US Factory Orders. Estimate 1.7%. Actual 1.2%
• 10:30 US Crude Oil Inventories. Estimate 1.4M. Actual -4.6M
• 11:00 US FOMC Member Loretta Mester Speaks

 Thursday (April 5)

• 4:30 British Services PMI. Estimate 53.9
• 8:30 US Unemployment Claims. Estimate 225K

*All release times are GMT

*Key events are in bold

GBP/USD for Wednesday, April 4, 2018

GBP/USD April 4 at 11:20 EDT

Open: 1.4059 High: 1.4097 Low: 1.4015 Close: 1.4079

GBP/USD Technical

GBP/USD edged higher in the Asian session but gave up these gains in European trade. The pair has posted slight gains in the North American session

• 1.4010 is providing support
• 1.4128 is the next resistance line
• Current range: 1.4010 to 1.4128

Further levels in both directions:

• Below: 1.4010, 1.3901 and 1.3793
• Above: 1.4128, 1.4227, 1.4345 and 1.4452

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Wednesday session. Currently, long positions have a slight majority (52%), indicative of slight trader bias towards GBP/USD continuing to move higher.

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.