GBP/USD – British pound stops slide, BoE in focus

GBP/USD has posted slight gains in the Wednesday session. In North American trade, the pair is trading at 1.2962, up 0.09% on the day. On the release front, there are no British events. In the U.S., there was good news as the trade deficit narrowed to $49.3 billion in November, down from the previous reading of $55.7 billion. This marked the lowest deficit in 5 months. On Thursday, the Bank of England sets the benchmark rate, which is expected to remain at 0.75%. The BoE will also release an inflation report and monetary policy summary, so traders should be prepared for stronger movement from the pound on Thursday. In the U.S., the key event is unemployment claims.

PMIs are a key gauge of economic activity, and the year has started off on the wrong foot, with weak British PMI scores in January. Last week, manufacturing PMI dipped to 52.8, down from 54.2 and missing expectations. Things didn’t improve this week. Construction PMI dropped to 50.6, a 10-month low. Services PMI also slowed, falling to 50.1 points. This was the lowest score since July 2016. These readings are worrisome, pointing to weak expansion in manufacturing and stagnation in the construction and services sectors. If the slowdown continues, investor appetite for the British pound could decrease.

The conundrum over the Irish border will be high on the agenda at a meeting between British Prime Minister May and EU Commissioner Jean Paul Juckner on Thursday. With Britain and the EU at an impasse over the Irish border stopgap, both sides will have show some flexibility to reach a solution that May can pass through parliament. May has said she wants to change the stopgap rather than eliminate it, but the Europeans are showing little interest in her predicament with parliament. Earlier on Wednesday,  Juckner reiterated that the EU would not renegotiate the withdrawal agreement. If the May-Juckner meeting is not a success, expect the blame game between Britain and the EU to intensify, which could further dampen investor sentiment and weigh on the British pound.

Quiet midweek eyed ahead of May’s Brussels visit

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GBP/USD Fundamentals

Wednesday (February 6)

• 8:30 US Trade Balance. Estimate -54.0B. Actual -49.3B
  
• 10:30 US Crude Oil Inventories. Estimate 1.3M
• 13:01 US 10-year Bond Auction
• 18:05 US FOMC Member Quarles Speaks
• 19:00 Fed Chair Powell Speaks

Thursday (February 7)

• 7:00 BoE Inflation Report
• 7:00 British MPC Official Bank Rate Votes. Estimate 0-0-9
• 7:00 British Monetary Policy Summary
• 7:00 British Official Bank Rate. Estimate 0.75%
• 7:00 British MPC Asset Purchase Facility. Estimate 435B
• 7:00 British MPC Asset Purchase Facility Votes. Estimate 0-0-9
• 8:30 US Unemployment Claims. Estimate 220K

*All release times are EST

*Key events are in bold

GBP/USD for Wednesday, February 6, 2019

GBP/USD February 6 at 10:25 EST

Open: 1.2951 High: 1.2979 Low: 1.2925 Close: 1.2962

GBP/USD Technical

GBP/USD was flat in the Asian session. The pair showed stronger movement in European trade, but ended the session unchanged. GBP/USD has posted slight gains in North American trade

• 1.2910 is providing support
• 1.3070 is the next resistance line
• Current range: 1.2910 to 1.3070

Further levels in both directions:

• Below: 1.2910, 1.2851 and 1.2729
• Above: 1.3070, 1.3170 and 1.3258

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