GBP/USD – British pound slips as GDP, manufacturing production shrink

GBP/USD has posted considerable losses in the Monday session. Currently, GBP/USD is trading at 1.2685 down, 0.41% on the day. On the release front, British numbers were unexpectedly soft. Monthly GDP dropped 0.4% in April, its second straight decline. There was no relief from Manufacturing Production, which plunged 3.9% in April, much weaker than the forecast of -1.1%. This was the largest decline since June 2002. In the U.S., there are no major events. JOLTS Jobs Orders slowed to 7.45 million, shy of the estimate of 7.50 million. On Tuesday, the U.K. releases wage growth and unemployment rolls, while the U.S. posts Producer Price Index reports.

The pound registered gains of close to 1.0% last week, as the U.S. dollar was broadly lower against the major currencies. Comments from Federal Reserve officials hinting at a rate cut sent the greenback lower. For most of the year, the Fed has sounded neutral about its next rate move, but last week’s U-turn was a dramatic development.  Fed chair Jerome Powell said that the Fed would “act as appropriate to sustain the expansion”, and analysts noted that he did not mention his “patient” approach to monetary policy, which has been a buzzword in Powell’s recent comments. Powell’s remarks echoed comments from James Bullard, president of the St. Louis Fed. Bullard stated that the Fed might have to lower rates shortly due to low inflation and the ongoing trade war with China. The CME Group has set the odds of a quarter-point cut in July at 67%, as the likelihood a rate cut later this year is growing.

The U.S. ended the week on a sour note, as nonfarm payrolls posted its second dismal reading in four months. In May, the economy created only 75 thousand jobs, down from 263 thousand a month earlier. Wage growth was unchanged at 0.2%, shy of the estimate of 0.3%. Despite these soft job numbers, the U.S. labor market is in strong shape, and the greenback could quickly bounce back.

Stocks Rally on Positive Trade Developments

GBP/USD Fundamentals

Monday (June 10)

  • 4:30 British GDP. Estimate -0.1%. Actual -0.4%
  • 4:30 British Manufacturing Production. Estimate -1.1%. Actual -3.9%
  • 4:30 British Construction Output. Estimate 0.6%. Actual -0.4%
  • 4:30 British Goods Trade Balance. Estimate -13.1B. Actual -12.1B
  • 4:30 British Index of Services. Estimate 0.2%. Actual 0.2%
  • 4:30 British Industrial Production. Estimate -0.7%. Actual -2.7%
  • 5:00 British MPC Member Tenreyro Speaks
  • 8:10 British NIESR GDP Estimate 0.1%
  • 10:00 US JOLTS Openings. Estimate 7.50M. Actual 7.45M
  • 13:00 British MPC Member Saunders Speaks

Tuesday (June 11)

  • 4:30 British Average Earnings Index. Estimate 2.9%
  • 4:30 British Claimant Count Change. Estimate 12.3K
  • 4:30 British Unemployment Rate. Estimate 3.8%
  • 6:00 US NFIB Small Business Index. Estimate 102.3
  • 8:30 US Core PPI. Estimate 0.2%
  • 8:30 US PPI. Estimate 0.1%

*All release times are DST

*Key events are in bold

GBP/USD for Monday, June 10, 2019

GBP/USD June 10 at 10:30 DST

Open: 1.2737 High: 1.2743 Low: 1.2653 Close: 1.2685

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2401 1.2477 12615 1.2723 1.2841 1.2910

GBP/USD posted small losses in the Asian session and the downward movement continued in the European session. The pair has reversed directions in North American trade and recorded slight gains

  • 1.2615 is providing support
  • 1.2723  is the next resistance line
  • Current range: 1.2615 to 1.2723

Further levels in both directions:

  • Below: 1.2615, 1.2477 and 1.2401
  • Above: 1.2723, 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.