GBP/USD – Pound improves on surprise surplus

British pound has posted slight gains in the Tuesday session. In North American trade, the pair is trading at 1.2870, up 0.56% on the day. On the release front, the UK posted a surplus of GBP 2.9 billion, above the estimate of GBP 2.1 billion. This marked the biggest surplus in the month of July since 2000. The news was less positive from CBI Industrial Order Expectations, which dropped to 7, shy of the estimate of 10 and a 3-month low. There are no U.S releases on the schedule. On Wednesday, the U.S releases Existing Homes and the Federal Reserve will publish the minutes of the July policy meeting.

It’s been a slow but steady climb for the pound, which has posted three winning sessions and is in positive territory. The pound has jumped on the currency bandwagon and posted gains against the dollar, as investor risk appetite has improved, following the announcement that the U.S and China had agreed to hold trade talks later this week in Washington. This follows months of escalating trade tensions, which have dampened risk appetite. The U.S is unhappy with the Chinese protection of local markets and technology transfers required in order for U.S businesses to operate in China, but it’s questionable if the Chinese will show much flexibility. If the talks show signs of progress, such as the suspension of a $16 billion tariff scheduled to take effect on August 23, German stock markets could continue to gain ground.

With little data for the markets to digest, the Federal Reserve will be in focus. On Wednesday, the Fed releases the minutes of the July meeting. This will be followed on Thursday by the Jackson Hole Symposium, a gathering of the heads of the major central banks. Investors will be keenly following these events, looking for hints regarding future monetary policy on the part of the Federal Reserve. The U.S economy continues to show strong growth but inflation and wage growth continue to lag, and Fed chair Jerome Powell will be expected to address these issues, and his speech could be a market-mover.

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GBP/USD Fundamentals

Tuesday (August 21)

• 4:30 British Public Sector Net Borrowing. Estimate -2.1B. Actual -2.9B
• 6:00 British CBI Industrial Order Expectations. Estimate 10. Actual 7

Wednesday (August 22)

• 10:00 US Existing Home Sales. Estimate 5.44M
• 14:00 US FOMC Meeting Minutes

*All release times are DST

*Key events are in bold

GBP/USD for Tuesday, August 21, 2018

GBP/USD August 21 at 12:00 DST

Open: 1.2750 High: 1.2778 Low: 1.2730 Close: 1.2870

GBP/USD Technical

GBP/USD edged higher in the Asian session. The pair was flat in European trade and has edged higher in North American trade

• 1.2852 is providing support
• 1.2996 is the next resistance line
• Current range: 1.2852 to 1.2996

Further levels in both directions:

• Below: 1.2852, 1.2706, 1.2589 and 1.2366
• Above: 1.2996, 1.3088 and 1.3173

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