GBP/USD – Pound slips, investors eye Carney, Fed Minutes

GBP/USD has lost ground in the Tuesday session, erasing the gains seen on Monday. In North American trade, the pair is trading at 1.2717, down 0.45% on the day. On the release front, British Halifax HPI rebounded with a strong gain of 2.2%, crushing the estimate of 0.5%. In the U.S., JOLTS Job Openings was unexpectedly soft, dropping to 6.83 million. This marked a four-month low. On Wednesday, Bank of England Governor Mark Carney will participate at a BoE event. The Federal Reserve releases the minutes of its December meeting, when it raised rates.

The equity markets continue to show swings, but investor optimism has improved, after dovish comments from Fed Chair Jerome Powell on Friday. Powell made a determined effort to ease the volatility which has rocked the markets in recent weeks. The markets had dropped sharply after the Fed’s December rate statement, which was less dovish than expected, as the Fed said it would continue raising interest rates in 2019. Powell tempered this stance with a more cautious outlook over rate policy, saying any rate decisions would be done prudently and with patience.

The Fed seems to be lowering expectations for additional rate hikes. Recent Fed forecasts have indicated two rate increases in 2019, but on Monday, Atlanta Fed President Raphael Bostic said that the economy would need only one rate hike. Some analysts have gone further, projecting a rate cut in 2019, which has put a chill on sentiment towards the U.S. dollar.

With Britain due to leave the European Union in less than 90 days, it’s still unclear if the sides will split with a withdrawal agreement in place. On Sunday, Prime Minister May reaffirmed that she would bring the withdrawal agreement to a vote in parliament next week. However, the deal will have a tough time passing in parliament, and the government has given no indication that it has a plan B if lawmakers reject the deal. The Europeans have insisted that they will not renegotiate a new agreement, so if the deal fails, a no-deal Brexit becomes a strong possibility. Such a scenario would have a negative effect on the British economy and would likely send the pound lower.

The Powell “Put” continues to resonate

A bit of the feel-good factor has temporarily abated

GBP/USD Fundamentals

Tuesday (January 8)

  • 3:30 British Halifax HPI. Estimate 0.5%. Actual 2.2%
  • 5:20 US NFIB Small Business Index. Estimate 103.1. Actual 104.4
  • 5:37 British 10-year Bond Auction. Actual 1.27/2.2
  • 10:00 US JOLTS Job Openings. Estimate 7.07M. Actual 6.89M
  • 15:00 US Consumer Credit. Estimate 17.3B
  • 21:00 US President Trump Speaks

Wednesday (January 9)

  • 10:30 BoE Governor Mark Carney Speaks
  • 14:00 US FOMC Meeting Minutes

*All release times are EST

*Key events are in bold

GBP/USD for Tuesday, January 8, 2019

GBP/USD January 8 at 12:10 EST

Open: 1.2775 High: 1.2797 Low: 1.2710 Close: 1.2717

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2488 1.2589 1.2706 1.2812 1.2915 1.3047

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

  • 1.2706 has weakened in support after losses by GBP/USD on Tuesday
  • 1.2812 is the next resistance line
  • Current range: 1.2706 to 1.2812

Further levels in both directions:

  • Below: 1.2706, 1.2589, 1.2488 and 1.2365
  • Above: 1.2812, 1.2915 and 1.3047

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.