GBP/USD – Pound Dips, US Jobless Claims Miss Expectations

The British pound has posted considerable losses on Thursday, erasing the gains made in the Wednesday session. In the North American session, GBP/USD is trading at 1.3140. On the release front, British Nationwide HPI beat expectations, posting a gain of 0.5%. In the US unemployment claims jumped to 266 thousand, higher than expected. On Friday, the US will publish Advance GDP, with the markets expecting a banner reading of 2.6%. We’ll also get a look at UoM Consumer Sentiment, which is expected to drop to 90.3 points.

There was positive news out of the UK, as second quarter British Preliminary GDP beat expectations. The indicator climbed 0.6%, beating the forecast of 0.5%. This shows that the economy did well leading up to the Brexit vote. However, third quarter GDP, which will reflect post-Brexit data, is expected to drop, and we could even see a contraction in growth. Monthly economic indicators are already pointing to a decline in economic growth since the referendum, such as recent PMI and retail sales numbers. In the wake of Brexit, the EU and Britain will have to hammer out and a new economic relationship and any developments with regard to the negotiations could clarify matters and lend some stability to the markets. So far, however, the only certainty is that negotiations will not commence anytime soon, as the British government has said that it will not invoke the exit mechanism (Article 50 of the Treaty of Lisbon) before the end of 2016. It has been a dismal summer for the British pound. The currency has dropped some 11 cents in June, and is down another 200 points in July.

There were no dramatic moves by the Federal Reserve, which concluded its policy meeting on Wednesday. The bank continued to hold the course on interest rates, maintaining levels at 0.25% in a 9-1 vote. The Fed statement sounded upbeat, saying that risks to the economy have receded and the employment market is getting tighter. The Fed added that it continues to monitor inflation levels and noted that the housing sector had improved. Will the Fed make a move and raise rates in September? It appears that the Fed could go either way, and policymakers will make a decision at the September meeting based on the strength of US data. This means that key US numbers, such as Friday’s Advance GDP report, will be under the market microscope, and unexpected readings could lead to strong volatility in the currency markets.

GBP/USD Fundamentals

Thursday (July 28)

• 2:00 British Nationwide HPI. Estimate 0.0%. Actual 0.5%
• 8:30 US Unemployment Claims. Estimate 261K. Actual 266K
• 10:30 US Natural Gas Storage. Estimate 29B
• 19:05 British GfK Consumer Confidence. Estimate -7 points

Upcoming Key Events

Friday (July 29)

• 8:30 US Advance GDP. Estimate 2.6%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 90.2

*All release times are EDT

GBP/USD for Thursday, July 28, 2016

GBP/USD July 28 at 10:45 GMT

Open: 1.3224 High: 1.3248 Low: 1.3129 Close: 1.3143

GBP/USD Technical

• GBP/USD has posted losses in the Asian and European sessions. The pair is unchanged early in North American session
• 1.3142 has switched to a support role following strong losses by GBP/USD. It remains fluid and could see further action in the North American session
• There is resistance at 1.3219

Further levels in both directions:

• Below: 1.3142, 1.3064, 1.2938 and 1.2778
• Above: 1.3219, 1.3349 and 1.3513
• Current range: 1.3142 to 1.3219

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged on Thursday. Currently, long positions have a majority (57%), indicative of trader bias towards GBP/USD reversing directions and moving higher.

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.