GBP/USD – Pound Unchanged, GfK Consumer Confidence Within Expectations

GBP/USD posted gains but has then retracted on Wednesday, as the pair trades slightly below the 1.31 line. On the release front, British GfK Consumer Confidence came in at -7 points, within expectations. In the US, we’ll get a look at two key indicators – ADP Nonfarm Employment Change and Pending Home Sales. On Thursday, the US releases unemployment claims and the ISM Manufacturing PMI. The UK will publish Manufacturing PMI.

British consumer confidence showed improvement in August and even beat the market forecast. The reading of minus -7 points to pessimism, but marked a sharp improvement over the July reading of minus -12 and edged above the estimate of minus -8. The British consumer continues to spend despite concerns over Brexit, as underscored by strong readings from CBI Realized Sales and retail sales. Recent inflation and employment numbers have also been solid, and the economy’s next test is the Manufacturing and Construction PMI reports.

The US consumer remains optimistic about the US economy, according to a key consumer confidence survey. CB Consumer confidence jumped to 1o1.1 points in August, above the forecast of 99.7 points. It marked the indicator’s highest level since September 2015. Recent consumer sentiment indicators have been steady, and if the optimism extends to actual consumer spending, we could see the odds of a rate hike in September or December, which have dramatically increased in the past week, continue to move upwards.

The markets are again abuzz over a possible rate increase in 2016, following an upbeat speech from Fed chair Janet Yellen on Friday at the Jackson Hole summit. Yellen’s message to the markets was refreshingly clear, as she said that the case for a rate increase had “strengthened in recent months”. Yellen noted that the key economic indicators were performing well – the labor market was approaching maximum employment, inflation was steady, and consumer spending remained solid. Still, Yellen did not provide any timeline on a rate hike nor did she spell out what the Fed wants to see before pressing the rate trigger. On Friday, Fed members Dennis Lockhart and Stanley Fischer both came out in favor of two rate hikes in 2016, and these comments helped the dollar record broad gains on Friday. The Fed’s stance has raised the odds of a rate move according to the CME Group FedWatch tool, with a September hike priced at 30% in September and 57% for a December hike. However, given that any move by the Fed will be data-dependent, US numbers ahead of the Fed policy meeting on September 21 could significantly change the rate outlook.

GBP/USD Fundamentals

Tuesday (August 30)

• 18:05 British GfK Consumer Confidence. Estimate -8 points. Actual -7 points

Wednesday (August 31)

• 2:00 British Nationwide HPI. Estimate -0.1%. Actual +0.6%
• 8:15 US ADP Non-Farm Employment Change. Estimate 174K. Actual 177K
• 9:45 US Chicago PMI. Estimate 54.1
• 10:00 US Pending Home Sales. Estimate 0.7%
• 10:30 US Crude Oil Inventories. Estimate 1.1M

Thursday (September 1)

• 4:30 British Manufacturing PMI. Estimate 49.1
• 8:30 US Unemployment Claims. Estimate 265K
• 10:00 US ISM Manufacturing PMI. Estimate 52.0

*All release times are EDT

* Key events are in bold

GBP/USD for Wednesday, August 31, 2016

GBP/USD August 31 at 9:00 GMT

Open: 1.3089 High: 1.3158 Low: 1.3063 Close: 1.3091

GBP/USD Technical

• GBP/USD posted slight gains in the Asian and European sessions. The pair has posted considerable losses in North American trade
• 1.3064 is providing support
• 1.3142 has some breathing room in resistance following considerable losses in the North American session

Further levels in both directions:

• Below: 1.3064, 1.2938 and 1.2849
• Above: 1.3142, 1.3219, 1.3327 and 1.3480
• Current range: 1.3064 to 1.3142

OANDA’s Open Positions Ratio

GBP/USD ratio has posted small gains on Wednesday. Long positions have a majority (55%), indicative of trader bias towards GBP/USD breaking out 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.