GBP/USD – Pound Gains as Construction PMI Jumps

GBP/USD has resumed its upward march, as the pair has crossed above the 1.64 line in Tuesday trading. Construction PMI sparkled, climbing to its highest level in over six years. In the US, it’s a quiet day, with no major releases on the calendar.

In the UK, there was more good news from PMI data, as Construction PMI jumped to its highest level since August 2007. The key index climbed to 62.4 points, up from 59.4 points in the previous release. The sharp reading easily beat the estimate of 59.3 points. Construction PMI follows a strong Manufacturing PMI earlier in the week. The pound continues to look red-hot and has gained over five cents against the US dollar since mid-November.

Many UK economic indicators have been posting strong gains, but there were some weak consumer releases late last week. GfK Consumer Confidence continues to look weak, coming in at -12 points, short of the estimate of -8 points. Net Lending to Individuals, an important gauge of consumer borrowing and spending, dropped to 1.7 billion pounds, missing the estimate of 2.1 billion. These weak readings indicate that consumer confidence and spending remain weak, despite the improvement in the British economy. Other consumer indicators, notably Retail Sales, are pointing to weak consumer spending, which is an important catalyst of economic activity.

On Thursday, there was an upbeat Financial Stability report from the Bank of England. The Bank stated that risks to financial stability had lessened as economic growth appears to be improving. At the same time, the BOE warned that a sharp rise in interest rates could threaten financial stability. This message is similar to what we heard from Governor Mark Carney when he testified before a parliamentary committee earlier in the week. Carney sought to dampen growing expectations of an interest hike, saying that economy still has plenty of slack and that the BOE might hold off on a rate hike even if unemployment fell below the 7% level.

US releases started the week in fine fashion on Monday, as ISM Manufacturing PMI jumped to 57.3 points, up from 56.4 the month before. This beat the estimate of 55.2 and was the index’s best showing since April 2011. The markets will be keeping close tabs on this week’s US employment releases, as the Fed is likely to step in and taper QE if employment numbers continue to improve. Unemployment Claims have looked sharp for the past two releases, and if the Non-Farm Payrolls and Unemployment Rate look solid, this week, the US dollar could make up some ground against the surging pound.

GBP/USD for Tuesday, December 3, 2013

GBP/USD December 3 at 16:45 GMT

GBP/USD 1.6418 H: 1.6437 L: 1.6346

GBP/USD Technical

• GBP/USD has posted gains in Tuesday trading. The pair touched a high of 1.6437 during the European session and has edged lower in North American trading.
• 1.6300 continues to provide support. This key line has some breathing room as the pair trades at higher levels. This is followed by support at 1.6231.
• On the upside, the pair faces resistance at 1.6476. This is followed by resistance at the round number of 1.6600, which has remained intact since August 2011.
• Current range: 1.6300 to 1.6476

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Tuesday trading. This is reflected in the pair’s current movement, as the pound has posted gains. Short positions continue to dominate the ratio, reflecting a trader bias towards the US dollar reversing directions and gaining ground on the pound.

The pair has posted gains following an excellent Construction PMI. With no major releases out of the US on Tuesday, the pair’s movement could be limited during the North American session.

GBP/USD Fundamentals

• 00:01 British BRC Retail Sales Monitor. Actual 0.6%.
• 9:30 British Construction PMI. Estimate 59.3 points. Actual 62.6 points.
• 15:00 US IBD/TIPP Economic Optimism. Estimate 43.2 points. Actual 43.1 points.
• All Day – US Total Vehicle Sales. Estimate 15.8M.

*Key releases are highlighted in bold

*All release times are GMT

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