GBP/USD – Pound Dips Despite Soft US Jobs Report

The British pound has posted losses in the Tuesday session. In North American trade, GBP/USD is trading at 1.3523, down 0.33% on the day. In economic news, there are no major British releases on the schedule. In the US, JOLTS Jobs Openings was unexpectedly soft, dropping to 5.88 million. This was well short of the estimate of 6.05 million. On Wednesday, the UK publishes Manufacturing Production, and the US releases Import Prices.

Theresa May & Co. have not had an easy time with the Brexit negotiations, as dealing with the Europeans has been an arduous and frustrating task. Moreover, there are serious divisions within the government with regard to the talks. Compounding May’s difficulties, the British public is not impressed with May’s performance on Brexit, according to an ORB poll published on Monday. The poll found that 63% of voters are dissatisfied with the government’s handling of Brexit, and voters are almost evenly split on whether Britain will be better off after Brexit. With a razor thin majority in parliament, Prime Minister May can ill afford any mistakes, and if her government runs into trouble, she may be forced to call elections, which could shake up the markets and send the pound downwards.

When the Federal Reserve is in the headlines, it’s usually on the topic of interest rates. However, another important parameter is the Fed balance sheet, which has ballooned to $4.2 trillion. Starting this month, the Fed will reduce its portfolio, which grew tremendously during the financial crisis of 2008-2009. However, a strong US economy has allowed the Fed to begin trimming the balance sheet. Incoming Fed Chair Jerome Powell, who takes over in February, has estimated that the balance sheet could drop to anywhere between $2.4 trillion to $2.9 trillion after several years of cuts. Fed policymakers have not indicated a magic number for the balance sheet, but the cuts indicate a vote of confidence in the US economy.

GBP/USD Fundamentals

Tuesday (January 9)

• 5:37 British 10-year Bond Auction
• 6:00 US NFIB Small Business Index. Estimate 108.4. Actual 104.9
• 10:00 US JOLTS Job Openings. Estimate 6.05M. Actual 5.88M

Wednesday (January 10)

• 4:30 British Manufacturing Production. Estimate 0.3%
• 8:30 US Import Prices. Estimate 0.4%

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, January 9, 2018

GBP/USD January 9 at 12:10 EDT

Open: 1.3568 High: 1.3582 Low: 1.3505 Close: 1.3523

GBP/USD Technical

GBP/USD showed little movement in the Asian session. The pair posted considerable losses in the European session has been choppy in North American trade

• 1.3503 is a weak support level
• 1.3655 is the next resistance line

Current range: 1.3503 to 1.3655

Further levels in both directions:

• Below: 1.3503, 1.3402, 1.3221 and 1.3186
• Above: 1.3655, 1.3809 and 1.3901

OANDA’s Open Positions Ratio

GBP/USD ratio is showing slight movement towards short positions. Currently, short positions have a majority (59%), indicative of trader bias towards GBP/USD continuing to move lower.

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.