GBP/USD – Pound Up Sharply as British Services PMI Sparkles

The British pound has posted sharp gains against the US dollar in Wednesday trading. GBP/USD has jumped about 150 points, as the pair trades at the 1.53 line in the North American session. The pound got a strong boost from British Services PMI, which hit its highest level in over three years. In the US, employment numbers were solid, but Trade Balance and the ISM Non-Manufacturing PMI missed their estimates.

The strong dollar has manhandled the pound for the past two weeks, but the British currency showed some flair on Wednesday, jumping more than a cent. This is the biggest gain we’ve seen since early June. The pound got a welcome boost from a superb reading from the British Services PMI. The index climbed from 54.6 points to 56.9 points, its highest level since March 2010.

There was more good news on Wednesday from the BOE, which released its quarterly credit conditions survey. The report found that demand for credit by businesses rose in Q2, and is expected to rise further in Q3. The BOE also expects an increase in home loans in Q3, which is good news for the UK housing sector. The optimistic report may signal that companies and potential home owners are becoming more confident about the UK economy.

In the US, the markets were treated to four key releases. US employment data continues to improve. ADP Non-Farm Payrolls, an unofficial release which precedes Friday’s government release, posted a gain of 188 thousand, its best showing since March. The estimate stood at 161 thousand. Unemployment Claims, released ahead of the July 4th holiday, came in at 343 thousand, slightly below the estimate of 345 thousand. The US continues to churn out larger trade deficits, as the July release came in at -$45.0 billion, much higher than the estimate of $-40.3 billion. Finally, the ISM Non-Manufacturing PMI looked weak, dropping from 53.7 points to 52.2 points. This was well short of the estimate of 54.3 points.

Back in the UK, the BOE will be setting its key interest rate and asset purchase levels on Thursday, and when the Bank of England speaks, the markets listen. The markets will be closely attuned as incoming governor Mark Carney presides over his first policy meeting at the central bank. Carney, who took over as head of the BOE on July 1, headed the Bank of Canada for five years, and is widely credited for steering Canada through the global financial crisis several years ago. Carney will be facing a lot of pressure to provide an effective monetary policy which will help right a sputtering UK economy. On just his second day of the job, the influential British Chambers of Commerce published an open letter calling on Carney to boost lending in order to revive the economy.

GBP/USD for Wednesday, July 3, 2013

GBP/USD July 3 at 15:10 GMT

GBP/USD 1.5296 H: 1.5302 L: 1.5130

GBP/USD Technical

GBP/USD has reversed directions in spectacular style, and is testing the 1.53 line after sharp gains on Wednesday. There is weak resistance at 1.5309, and this line could fall if the pound continues to move higher. There is stronger resistance at 1.5432. On the downside, the pair is receiving support at 1.5203. This line has strengthened as the pair has surged higher. This is followed by a support level at 1.5111.

• Current range: 1.5203 to 1.5309

Further levels in both directions:

• Below: 1.5203, 1.5111, 1.5000, 1.4896 and 1.4781
• Above: 1.5309, 1.5432, 1.5557 and 1.5700

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little change in the Wednesday session. This is not reflected in the pair’s current movement, as the pound has soared against the US dollar. The ratio is close to an even split, as traders remain divided on what direction we can expect the pair to take.

GBP/USD Fundamentals

• 8:30 British Services PMI. Estimate 54.6 points. Actual 56.9 points
• 8:30 Bank of England Credit Conditions Survey.
• 8:30 British Housing Equity Withdrawal. Actual -8.8B.
• 12:15 US ADP Non-Farm Employment Change. Estimate 161K. Actual 188K.
• 12:30 US Trade Balance. Estimate -40.3B. Actual -45.0B.
• 12:30 US Unemployment Claims. Estimate 345K. Actual 343K.
• 14:00 US ISM Non-Manufacturing PMI. Estimate 54.3 points. Actual 52.2 points. 
• 14:00 US Treasury Secretary Jack Lew Speaks.
• 14:30 US Crude Oil Inventories. Estimate -2.6M. Actual -10.3M.

*Key releases are highlighted in bold

*All release times are GMT

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