GBP/USD – British pound higher as consumer credit levels rise

The British pound has posted gains in the Monday session. In North American trade, the pair is trading at 1.3136, up 0.24% on the day. On the release front, British Net Lending to Individuals improved to GBP 5.4 billion, edging above the estimate of GBP 5.3 billion. Later in the day, British GfK Consumer Confidence is expected to post a second straight reading of -9 points. In the U.S, Pending Home Sales posted a strong gain of 0.9%, rebounding after two straight declines. This easily beat the estimate of 0.4%. On Tuesday, the U.S releases consumer spending and inflation indicators, as well as CB Consumer Confidence.

The pound hasn’t made much noise in recent weeks, but that could change later in the week. On Thursday, the Bank of England will set the benchmark rate, and the markets are expecting a 25-point hike, which would raise the rate to 0.75%. BoE policymakers are divided on the timing of hike, the economy is coming off a soft first quarter and wage growth has been weak – both reasons to avoid a hike. Proponents of a rate increase point to the tight labor market and high employment participation rate. Brexit is another factor, as the messy state of negotiations with the EU could lead to a ‘hard Brexit’ (no deal with the EU) which could take a toll on the economy. It could be a busy week for the pound ahead of the rate meeting.

The U.S economy continues to sparkle, and Friday’s Advance GDP for the second quarter reflected this, with an excellent gain of 4.1%. This is much higher than the 2.2% gain recorded in the first quarter. This reading was within market expectations, so the dollar wasn’t able to gain ground. Strong economic numbers have kept the U.S currency at high levels, despite recent remarks by President Trump that the dollar is too high and is hampering exports. These comments have weighed on the dollar, but usually for a brief time only, as the performance of the economy has talked louder than Trump’s tweets. On Friday, Trump took credit for the strong GDP reading and claimed that “these numbers are very, very sustainable”. However, analysts are being more cautious in their forecasts, with growth in the third quarter expected to drop to around 2.5 percent.

  Dollar marks time in Asia as traders consider a busy data week

  G7 FX moves look to central banks for direction

GBP/USD Fundamentals

Monday (July 30)

  • 4:30 British Net Lending to Individuals. Estimate 5.4B. Actual 5.3B
  • 4:30 British M4 Money Supply. Estimate 0.6%. Actual -0.3%
  • 4:30 British Mortgage Approvals. Estimate 66K. Actual 66K
  • 10:00 US Pending Home Sales. Estimate 0.4%. Actual 0.9%
  • Tentative – US Loan Officer Survey
  • 19:01 British GfK Consumer Confidence. Estimate -9

Tuesday (July 31)

  • 8:30 US Core PCE Price Index. Estimate 0.1%
  • 8:30 US Personal Spending. Estimate 0.4%
  • 10:00 US CB Consumer Confidence. Estimate 126.5

*All release times are DST

*Key events are in bold

GBP/USD for Monday, July 30, 2018

GBP/USD July 26 at 12:10 DST

Open: 1.3105 High: 1.3152 Low: 1.3097 Close: 1.3136

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2852 1.2996 1.3088 1.3186 1.3263 1.3362

GBP/USD inched higher in the Asian session. The pair edged lower in the European session and has posted small losses in North American trade

  • 1.3088 is providing support
  • 1.3186 was tested earlier in resistance
  • Current range: 1.3088 to 1.3186

Further levels in both directions:

  • Below: 1.3088, 1.2996, 1.2852 and 1.2706
  • Above: 1.3186, 1.3263 and 1.3362

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.