GBP/USD – Pound Slides to 5-Week Low as T-Bills Boost Dollar

The British pound has lost ground in the Monday session, as the pound’s woes continue after sharp losses last week. In North American trade, GBP/USD is trading at 1.3947, down 0.40% on the day. On the release front, there are no British events on the schedule. In the US, Existing Home Sales improved to 5.60 million, beating the estimate of 5.55 million. This marked a 4-month high. On Tuesday, the UK releases Public Sector Net Borrowing and the US publishes CB Consumer Confidence.

The US dollar has posted broad gains to start the week, sending the pound lower for a fifth straight day. GDP/USD slipped 1.6% last week, and the pound is again below the symbolic 1.40 line. The greenback received a boost on Monday from US Treasury bills, which punched past the 3-percent threshold for the first time since January 2014. With treasury spreads widening over European and Japanese yields, investors have propped up the greenback.

Is the US-China trade war headed to a trade truce? The markets have been marked by volatility in recent weeks, in response to tariffs which the US and China have imposed on the other. US President Trump has threatened to slap tariffs on up to $150 billion on Chinese goods, and China has promised to respond with heavy tariffs on US imports. The escalating crisis has raised fears that a trade war between the two economic giants could slow down Chinese growth and trigger a global recession. However, US Treasury Secretary Steven Mnuchin sought to lower the rhetoric on the weekend, saying that he was considering a trip to China, adding he was “cautiously optimistic” that the two sides could resolve the trade dispute. If the US and China can patch up their differences, the safe-haven Japanese currency could continue to lose ground.

U.S Dollar Responds to Higher Yields

GBP/USD Fundamentals

 Monday (April 23)

  • 9:45 US Flash Manufacturing PMI. Estimate 55.2. Actual 56.6
  • 9:45 US Flash Services PMI. Estimate 54.3. Actual 54.4
  • 10:00 US Existing Home Sales. Estimate 5.55M. Actual 5.60M

 Tuesday (April 24)

  • 4:30 British Public Sector Net Borrowing
  • 10:00 US CB Consumer Confidence.  Estimate 126.0
  • 10:00 US New Home Sales. Estimate 625K

*All release times are DST

*Key events are in bold

GBP/USD for Monday, April 23, 2018

GBP/USD April 23 at 12:40 DST

Open: 1.4004 High: 1.4031 Low: 1.3937 Close: 1.3947

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3712 1.3796 1.3901 1.4010 1.4128 1.4227

GBP/USD continues to lose ground and break through support levels. The pair ticked higher in the Asian session. GDP/USD lost ground in European trade and continues to head lower in the North American session

  • 1.3901 is providing support
  • 1.4010 is the next resistance line
  • Current range: 1.3901 to 1.4010

Further levels in both directions:

  • Below: 1.3901, 1.3796 and 1.3712
  • Above: 1.4010, 1.4128, 1.4227 and 1.4345

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing short positions with a majority (53%). This is indicative of trader bias towards GBP/USD continuing to move lower.

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.