GBP/USD – Pound under pressure as British wage growth falls short of estimate

GBP/USD continues to lose ground this week. In the North American session, the pair is trading at 1.2917, down 0.32% on the day. On the release front, the U.K. released key employment numbers. Wage growth slowed to 3.2% in March, down from 3.5% a month earlier. This missed the estimate of 3.4% and was the lowest gain since September. The unemployment rate sparkled in March, dropping to 3.8%. This beat the estimate of 3.9%. Unemployment claims fell to 24.7 thousand in April, down from 28.3 thousand in March. Still, this was above the forecast of 24.2 thousand. There are no major U.S. events on the schedule. The U.S. will post retail sales and the Empire State manufacturing index.

The pound continues to stumble, 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 on Monday that it would slap tariffs on $60 billion of U.S products. Despite the rise in tensions between China and the U.S., the new tariffs do not take effect immediately. The U.S. tariffs do not apply to Chinese goods that are in transit, and the shipping of goods across the Pacific can take up to three weeks. The Chinese tariffs do not kick in until June. This hiatus gives negotiators some breathing room before the tariffs take effect.

Brexit may have been pushed off until October, but confusion and uncertainty over Britain’s departure from the EU remain. Prime Minister May, stymied by parliament in three attempts to pass a Brexit withdrawal bill, is now trying to reach an agreement with Labor leader Jeremy Corbyn in order to win approval for a withdrawal bill. However, this could prove to be a dead end for the embattled May. Corbyn is insisting on a customs union with the EU, which is anathema to many Conservative lawmakers, who fear such an arrangement will tie the U.K. to the EU for an indefinite period.

Commodities Weekly: Commodities reel under tariff war escalation

From BRICS to WOWS

GBP/USD Fundamentals

Tuesday (May 14)

  • 4:30 British Average Earnings Index. Estimate 3.4%. Actual 3.2%
  • 4:30 British Unemployment Rate. Estimate 3.9%. Actual 3.8%
  • 4:30 British Claimant Count Change. Estimate 24.2K. Actual 24.7K
  • 6:00 US NFIB Small Business Index. Estimate 102.3. Actual 103.5
  • 8:30 US Import Prices. Estimate 0.7%. Actual 0.2%
  • 12:45 US FOMC Member George Speaks

Wednesday (May 15)

  • 8:30 US Core Retail Sales. Estimate 0.7%
  • 8:30 US Retail Sales. Estimate 0.2%
  • 8:30 US Empire State Manufacturing Index. Estimate 8.2

*All release times are DST

*Key events are in bold

GBP/USD for Wednesday, May 14, 2019

GBP/USD May 14 at 9:05 DST

Open: 1.2958 High: 1.2971 Low: 1.2916 Close: 1.2917

GBP/USD Technical

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

GBP/USD was mostly flat in the Asian session. The pair posted slight losses in European trade but recovered. The pair has edged lower early in the North American session

  • 1.2910 is a weak support level. It could be tested in the North American session
  • 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.