GBP/USD – British pound slips after Carney warning on Brexit

After three days of gains, GBP/USD has dropped considerably on Thursday. In North American trade, GBP/USD is trading at 1.3075 down 0.62% on the day. On the release front, British new home-secured loans dropped to GBP 6.2 billion, shy of the estimate of GBP 7.7 billion. In the U.S, the highlight was unemployment claims, which dropped to 202 thousand. This was below the forecast of 215 thousand. On Friday, the focus will be on U.S. employment data, with the release of nonfarm payrolls and wage growth.

U.S. indicators continue to have a disappointing week. Retail sales and durable goods orders posted declines and the trend continued on Wednesday. ADP nonfarm payrolls plunged to 129 thousand, down from 183 thousand in the previous release. Is this a precursor of what to expect on Friday? Nonfarm payrolls are projected at 175 thousand, a soft number in comparison to recent releases. Wage growth is expected to slow to 0.2%. If these key indicators are softer than expected, the U.S. dollar could lose ground.

Despite the chaos surrounding Brexit, the pound has weathered the storm better than many analysts expected. GBP/USD declined 1.7% in March and has posted small gains in April. With parliament having rejected the government’s withdrawal deal but unable to provide an alternative, a hard Brexit remains a serious possibility. On Wednesday, BoE Governor Mark  Carney said that the likelihood of a hard Brexit remained “alarmingly high” and that warned of the dangers of a no-deal scenario. At the same time, he said that London’s financial center could cope with Britain leaving the EU without a deal.

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GBP/USD Fundamentals

Thursday (April 4)

• 4:30 British Housing Equity Withdrawal. Estimate -7.7B. Actual -6.2B
• 7:30 US Challenger Job Cuts. Actual 0.4%
• 8:30 US Unemployment Claims. Estimate 215K. Actual 202K
• 10:30 US Natural Gas Storage. Estimate 2B

Friday (April 5)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 175K
• 8:30 US Unemployment Rate. Estimate 3.8%

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, April 4, 2019

GBP/USD April 4 at 11:45 DST

Open: 1.3157 High: 1.3191 Low: 1.3062 Close: 1.3075

GBP/USD Technical

GBP/USD ticked higher in the Asian session. The pair has edged lower in European trade and continues to lose ground in the North American session

• 1.3070 was tested earlier in support. It is a weak line
• 1.3170 is the next resistance line
• Current range: 1.3070 to 1.3170

Further levels in both directions:

• Below: 1.3070, 1.2910 and 1.2841
• Above: 1.3170, 1.3258, 1.3362 and 1.3460

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