GBP/USD – Pound drops to 2-week low as trade tensions weigh on risk appetite

GBP/USD has resumed its losing ways on Monday, after falling 1.3% last week. In the North American session, the pair is trading at 1.2960, down 0.30% on the day. On the release front, there are no data indicators in the U.K. or the U.S. On Tuesday, the U.K. releases wage growth and unemployment claims.

The pound is under pressure, as nervous investors are snapping up the safe-haven greenback due to rising trade tensions between the U.S. and China. On Friday, the U.S. raised tariffs on $200 billion in Chinese goods, from 10% to 25%. The move was announced a week ago, triggering sharp declines in the equity markets. The Chinese response was vigorous, with Bejing announcing earlier on Monday that it would slap tariffs on $60 billion of U.S products.

Despite the tit-for tat tariffs between the U.S. and China, talks between the sides continue, with officials scheduled to hold the next round of talks in Beijing. The new tariffs do not apply to Chinese goods that left port prior to May 10, affording a 2-week window for negotiators before the tariffs take effect. The escalation in tensions has shelved a meeting between President Trump and Chinese President Xi, but the two leaders could meet at the G-20 summit in Japan in June.

British data was a mixed bag on Friday, leaving the pound unchanged. The monthly GDP release declined in March by 0.1%, above the estimate of 0.0%. There was better news from the quarterly indicator. Preliminary GDP for Q1 came in at 0.5%, matching the forecast. This was up from final GDP in Q4, which climbed 0.2%. Manufacturing Production remained steady at 0.9% in March, crushing the estimate of 0.1%.

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GBP/USD Fundamentals

Monday (May 13)

  • 9:10 FOMC Member Clarida Speaks

Tuesday (May 14)

  • 4:30 British Average Earnings Index. Estimate 3.4%
  • 4:30 British Unemployment Rate. Estimate 3.9%
  • 4:30 British Claimant Count Change. Estimate 24.2K

*All release times are DST

*Key events are in bold

GBP/USD for Monday, May 13, 2019

GBP/USD May 13 at 11:40 DST

Open: 1.3000 High: 1.3041 Low: 1.2954 Close: 1.2960

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2730 1.2841 12910 1.3000 1.3070 1.3170

GBP/USD was flat in the Asian session. The pair posted considerable losses in European trade and is flat in the North American session

  • 1.2910 is providing support
  • 1.3000 is the next resistance line
  • Current range: 1.2910 to 1.3000

Further levels in both directions:

  • Below: 1.2910, 1.2841 and 1.2730
  • Above: 1.3000, 1.3070, 1.3170 and 1.3217

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.