GBP/USD – British pound jumps on wage growth, Brexit hopes

GBP/USD has posted strong gains in the Tuesday session, after starting the week with losses. In North American trade, the pair is trading at 1.2990, up 1.07% on the day. On the release front, British wage growth improved to 3.0%, matching the forecast. However, unemployment rolls swelled by 20.2 thousand, much higher than the estimate of 4.3 thousand. There are no major releases out of the U.S on the schedule. On Wednesday, both the U.K and the U.S. releases CPI reports.

Is a Brexit deal around the corner? Prime Minister May said on Tuesday that a “small number of outstanding issues” remain to be hammered out. That may be so, but one of those issues is the Irish border, where the parties appear to be far apart. Both sides agree that there should not be a return to a hard border between Ireland and Northern Ireland, but cannot agree on the next step. Many pro-Brexit MPs are against having the U.K remain in a customs union with Europe after Brexit. May would prefer a U.K-wide customs setup, but some EU members are against such an arrangement, which could be seen as allowing Britain access to the single market after Brexit. The negotiations are continuing, and an announcement that significant progress has been made could send the pound sharply higher.

The Fed shows no signs of easing up on interest rate hikes, with Fed policymakers stating that interest rates will continue to rise until the “neutral rate” of between 2.5 percent and 3.5 percent is reached. This means we can expect rate hikes once a quarter in 2019, barring a sharp downturn in the economy. The policy of gradual increases is good news for the U.S dollar, as higher interest rates mean that the greenback is more attractive to investors.

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GBP/USD Fundamentals

Tuesday (November 13)

• 4:30 British Average Earnings Index. Estimate 3.0%. Actual 3.0%
• 4:30 British Unemployment Rate. Estimate 4.0%. Actual 4.1%
• 4:30 British Claimant Count Change. Estimate 4.3K. Actual 20.2K
• 5:14 US NFIB Small Business Index. Estimate 108.0. Actual 107.4
• 10:00 US FOMC Member Brainard Speaks
• 14:00 US Federal Budget Balance. Estimate -116.6B
• Tentative – US Loan Officer Survey

Wednesday (November 14)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 18:00 US Fed Chair Powell Speaks

*All release times are DST

*Key events are in bold

GBP/USD for Tuesday, November 13, 2018

GBP/USD November 13 at 11:05 EST

Open: 1.2850 High: 1.2842 Low: 1.2986 Close: 1.2990

GBP/USD Technical

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

• 1.2915 has switched to a support role after strong gains by GBP/USD on Tuesday
• 1.3048 is the next resistance line
• Current range: 1.2915 to 1.3048

Further levels in both directions:

• Below: 1.2915, 1.2812 and 1.2706
• Above: 1.3048, 1.3173, 1.3301 and 1.3408

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