GBP/USD – British Pound Trading Sideways, Manufacturing PMI Next

The British pound is almost unchanged in the Thursday trade. In the North American session, GBP/USD is trading at 1.3300, up 0.013% on the day. On the release front, British GfK Consumer Confidence remains weak, pointing to a glum British consumer. The indicator came in at -7, just above the estimate of -8 points. In the US, Personal Spending and PCE Price Index both beat their estimates. Unemployment claims dropped sharply to 221 thousand, beating the estimate of 228 thousand. On Friday, British Manufacturing PMI is expected to dip to 53.5 points. In the U.S, the focus will be on employment data, with the release of nonfarm payrolls and wage growth.

Is the Federal Reserve moving closer to a neutral monetary policy? Recent statements by FOMC policymakers appear to support such a conclusion, which would mean that the Fed would let the economy ‘ride on its own steam’ without intervening by adjusting interest rates. In the meantime, the Fed continues to project two more rate hikes in 2018, after raising rates by a quarter-point in March. The most likely dates for a rate hike are June and September. A fourth hike in December is possible, with a likelihood of about 40%. The minutes of the May meeting noted that policymakers would consider allowing inflation to rise above the Fed’s 2% target for a temporary period, which means that the Fed would not rush to raise rates based on the inflation target.

With the Brexit deadline of March 2019 creeping ever closer, the May government still does not have a coherent plan regarding its departure from the EU. The European Council meets next month, and Brexit is sure to be high up on the agenda. The Europeans have often expressed exasperation at a lack of direction from the British, as there are deep divisions in the May cabinet between the ‘hardliners’ and those who favor a softer Brexit, with close links to the continent. Some lawmakers are raising their voices, calling on May to seek a ‘sensible’ deal with Europe. One vexing issue is the status of the Irish border – how to maintain an open border between Ireland and Northern Ireland when the UK leaves the EU. May has proposed a “new customs partnership” between Northern Ireland and Ireland, but the Europeans have rejected this idea as being unworkable, and want the U.K to simply copy EU trade rules. This suggestion has been rejected by Brexit hardliners, who don’t want to follow orders from Brussels.

GBP/USD Fundamentals

Wednesday (May 30)

  • 19:01 British GfK Consumer Confidence. Estimate -8. Actual -7

Thursday (May 31)

  • 2:00 British Nationwide HPI. Estimate -0.2%. Actual 0.2%
  • 4:30 British Net Lending to Individuals. Estimate 5.2B. Actual 5.7B
  • 4:3o British M4 Money Supply. Estimate -1.1%. Actual 0.2%
  • 4;30 British Mortgage Approvals. Estimate 63K. Actual 62K
  • 7:30 US Challenger Job Cuts. Actual -4.8%
  • 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.2
  • 8:30 US Personal Spending. Estimate 0.4%. Actual 0.6%
  • 8:30 US Unemployment Claims. Estimate 228K. Actual 221K
  • 8:30 US Personal Income. Estimate 0.3%. Actual 0.3%
  • 9:45 US Chicago PMI. Estimate 58.2
  • 10:00 US Pending Home Sales. Estimate 0.4%
  • 10:30 US Natural Gas Storage. Estimate 100B
  • 11:00 US Crude Oil Inventories. Estimate -0.4M
  • 12:45 US FOMC Member Rafael Bostic Speaks
  • 13:00 US FOMC Member Lael Brainard Speaks

Friday (June 1)

  • 4:30 British Manufacturing PMI. Estimate 53.5
  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 189K
  • 8:30 US Unemployment Rate. Estimate 3.9%

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, May 31, 2018

GBP/USD May 31 at 11:50 DST

Open: 1.3283 High: 1.3349 Low: 1.3277 Close: 1.3300

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2965 1.3065 1.3186 1.3301 1.3402 1.3494

GBP/USD ticked higher in the Asian session and posted further gains in European trade. GBP/USD has given up some of these gains in the North American session

  • 1.3186 is providing strong support
  • 1.3301 was tested earlier in resistance and remains under pressure. It could break in the North American session
  • Current range: 1.3186 to 1.3301

Further levels in both directions:

  • Below: 1.3186, 1.3065 and 1.2965
  • Above: 1.3301, 1.3494, 1.3613 and 1.3712

OANDA’s Open Positions Ratio

GBP/USD ratio is showing gains in long positions. Currently, long positions have a majority (67%), indicative of trader bias towards GBP/USD continuing to move upwards.

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.