GBP/USD – British pound rally continues after strong wage growth

GBP/USD has posted strong gains in the Tuesday session. In North American trade, the pair is trading at 1.3039, up 0.88% on the day. On the release front, British employment data was solid, helping the pound extend its rally. In economic news, the sole U.S. indicator is a minor housing report. On Wednesday, the FOMC releases the minutes of its January policy meeting.

The pound is on a roll, as GDP/USD has jumped 1.8% since Friday. Earlier on Tuesday, the pair punched above the 1.30 line for the first time since February 5. Investors were pleased with the January job numbers, as the U.K. labor picture remains rosy despite the pressures of the global trade war and the tensions around Brexit. Wage growth remains strong, posting a second straight gain of 3.4%, just below the forecast of 3.5%. The number of employed people continues to grow, and the unemployment rate remained pegged at just 4.0%. The pound started the current rally on Friday, after retail sales jumped an impressive 1.0%.

All eyes will be on the Federal Reserve on Wednesday, with the release of the minutes of its most recent meeting. The Fed acted aggressively in 2018, boosting rates four times in order to keep the red-hot U.S. economy from overheating. Since raising rates in December, however, the Fed has changed direction and become much more dovish. In late 2018, there was talk of up to four rate hikes in 2019, but the Fed has revised its forecast to two hikes. The markets have gone further, projecting no rate increases this year, and there has even been talk of a rate cut in late 2019. In the January rate statement, the Fed discarded previous pledges of “further gradual increases” in interest rates, and said it would be “patient” before any further hikes.

Dollar in no man’s land

GBP/USD Fundamentals

Tuesday (February 19)

  • 4:30 British Average Earnings. Estimate 3.5%. Actual 3.4%
  • 4:30 British Claimant Change. Estimate 12.3K. Actual 14.2K
  • 4:30 British Unemployment Rate. Estimate 4.0%. Actual 4.0%
  • 10:00 US NAHB Housing Market. Estimate 59

Wednesday (February 20)

  • 6:00 British CBI Industrial Order Expectations. Estimate -5
  • 14:00 US FOMC Meeting Minutes

*All release times are EST

*Key events are in bold

GBP/USD for Tuesday, February 19, 2019

GBP/USD February 19 at 11:40 EST

Open: 1.2925 High: 1.3035 Low: 1.2896 Close: 1.3039

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2729 1.2851 1.2910 1.3070 1.3170 1.3258

GBP/USD posted small losses in the Asian session and has edged higher in European trade. GBP/USD has recorded considerable gains in North American trade

  • 1.2910 is providing support
  • 1.3070 has weakened in resistance after strong gains by GBP/USD on Tuesday
  • Current range: 1.2910 to 1.3070

Further levels in both directions:

  • Below: 1.2910, 1.2851, 1.2729 and 1.2615
  • Above: 1.3070, 1.3170 and 1.3258

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.