GBP/USD – British pound gains ground as Fed rate comments weigh on dollar

GBP/USD has posted slight gains in the Thursday session. Currently, GBP/USD is trading at 1.2727, up 0.36% on the day. On the release front, there are no British events. In the U.S., unemployment claims rose to 218 thousand, above the estimate of 215 thousand. On Friday, the U.S. releases nonfarm payrolls and wage growth.

With the Brexit conundrum continuing to give investors fits, this week’s PMIs did little to comfort the markets about the health of the British economy. The manufacturing and services PMIs missed their estimates and came in at 48.6 and 49.4, which indicates contraction. The services PMI was slightly better, with a reading of 51.0. Still, this points to stagnation in the services sector. It’s becoming increasingly difficult to make a case for going long on the pound, as investors are finding more appealing alternatives, such as the U.S. dollar. GBP/USD had a dreadful month of May, sliding 3.1%. It was the pound’s worst monthly performance since May 2018.

Since raising rates back in December, the Federal Reserve has sounded neutral with regard to rate movement. However, the Fed made a dramatic U-turn this week, with Fed Chair Jerome Powell hinting at a rate cut. On Tuesday, Powell said that the Fed would “act as appropriate to sustain the expansion”. It was also noteworthy that Powell did not mention his “patient” approach to monetary policy, which has been a buzzword in his recent comments. Also this week, St. Louis Fed president James Bullard said that the Fed might have to lower rates shortly due to low inflation and the ongoing trade war with China.

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GBP/USD Fundamentals

Thursday (June 6)

  • 7:30 US Challenger Cuts. Actual 85.9%
  • 8:30 US Unemployment Claims. Estimate 215K. Actual 218K
  • 8:30 US Revised Nonfarm Productivity. Estimate 3.6%. Actual 3.4%
  • 8:30 US Revised Unit Labor Costs. Estimate -0.9%. Actual -1.6%
  • 8:30 US Trade Balance. Estimate -50.5B. Actual -50.8B
  • 10:30 US Natural Gas Storage. Estimate 110B
  • 13:00 US FOMC Member Williams Speaks

Friday (June 7)

  • 8:30 US Average Hourly Earnings. Actual 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 180K
  • 8:30 US Unemployment Rate. Estimate 3.6%

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, June 6, 2019

GBP/USD June 6 at 8:50 DST

Open: 1.2682 High: 1.2733 Low: 1.2669 Close: 1.2727

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2477 1.2615 12723 1.2841 1.2910 1.3000

GBP/USD showed little movement in the Asian session. The pair edged higher in European trade and the upward movement continues in the North American session

  • 1.2723 is a fluid line. Currently, it is a weak support level
  • 1.2841 is the next resistance line
  • Current range: 1.2723 to 1.2841

Further levels in both directions:

  • Below: 1.2723, 1.2615, 1.2477 and 1.2401
  • Above: 1.2841, 1.2910 and 1.3000

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.