GBP/USD – Pound Shrugs off Strong Job Numbers, Fed Minutes Ahead

The British pound is showing limited movement on Wednesday, as GBP/USD trades just above the 1.30 level. In the UK, the Average Earnings Index posted a gain of 2.4%, within expectations. Claimant Count Change impressed with a decline of 8.6 thousand and the unemployment rate remained steady at 4.9%. In the US, today’s highlight is the FOMC minutes from the Fed’s July policy meeting. Thursday promises to be busy, with several key events. The UK publishes Retail Sales, while the US will release two key events – Philly Fed Manufacturing Index and Unemployment Claims.

There has been a lot of concern that “hard” data in the third quarter would point to a sputtering British economy, and this sentiment has contributed to the rocky August that the pound has endured – on Monday, GBP/USD dropped below the 1.29 line for the first time since mid-July. However, key UK releases have looked sharp this week, and the pound has responded by punching past the 1.30 level. British employment numbers impressed in July, as unemployment rolls shrunk by 8.6 thousand, compared to the estimate of a 5.2 thousand gain. Wage growth was solid with a 2.4% gain, just short of the forecast of 2.5%. On Tuesday, the pound jumped after solid July inflation numbers. CPI, the primary gauge of consumer inflation, posted a gain of 0.6%, its best showing since November 2014. PPI Input and RPI also improved in July and beat their estimates. Next up is Retail Sales – will the indicator follow suit and beat expectations?

US inflation numbers remain very weak, a continuing sore point in a generally strong US economy. The lack of inflation was underscored on Tuesday by consumer inflation reports for July. CPI posted a weak reading of 0.0%, its worst showing in five months. Core CPI dropped to 0.1%, shy of the estimate of 0.2%. Wednesday’s highlight is the Federal Reserve minutes, which will provide details of the Fed’s July policy meeting. However, the minutes could prove to be a non-event, since there have been a host of key releases since the July meeting. Problem is, the data is pointing in all directions, making it a tricky task to try and figure out when the Fed might raise interest rates. After a soft GDP report in late July, nonfarm payrolls was stellar. However, this was followed by weak retail sales and CPI numbers. Bottom line? A September hike is virtually off the table, while the odds of a December hike are pegged at 50/50. However, Fed policymakers will be hesitant to raise rates if key indicators, particularly inflation levels, remain close to zero.

GBP/USD Fundamentals

Wednesday (August 17)

  • 4:30 British Average Earnings Index. Estimate 2.5%. Actual 2.4%
  • 4:30 British Claimant Count Change. Estimate 5.2K. Actual -8.6K
  • 4:30 British Unemployment Rate. Estimate 4.9%. Actual 4.9%
  • 10:30 US Crude Oil Inventories. Estimate 0.3M
  • 13:00 FOMC Member James Bullard Speaks
  • 14:00 US FOMC Meeting Minutes

Thursday (August 18)

  • 4:30 British Retail Sales. Estimate 0.1%
  • 8:30 US Philly Fed Manufacturing Index. Estimate 1.4
  • 8:30 US Unemployment Claims. Estimate 269K

*Key releases are highlighted in bold

*All release times are EDT

GBP/USD for Wednesday, August 17, 2016

GBP/USD August 17 at 8:05 GMT

Open: 1.3028 High: 1.3063 Low: 1.2994 Close: 1.3013

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2680 1.2778 1.2938 1.3064 1.3142 1.3219
  • GBP/USD was flat in the Asian session. The pair has posted small losses in European trade
  • There is resistance at 1.3064
  • 1.2938 is providing support

Further levels in both directions:

  • Below: 1.2938, 1.2778, 1.2680 and 1.2525
  • Above: 1.3064, 1.3142 and 1.3219
  • Current range: 1.2938 to 1.3064

OANDA’s Open Positions Ratio

GBP/USD ratio is showing gains in long positions. Currently, long positions have a majority (59%), indicative of trader bias towards GBP/USD reversing directions and moving upwards.

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.