GBP/USD – Pound Moves Higher, US Consumer Reports Mixed

GBP/USD has posted considerable gains on Tuesday, continuing the upward movement which marked the Monday session. Early in the North American session, the pair is trading just below the 1.23 level. On the release front, US CPI edged upwards to 0.3%, matching the forecast. Core CPI dipped to 0.1%, shy of the forecast of 0.2%. In the UK, British CPI impressed with a strong gain of 1.0%, edging above the forecast of 0.9%. On Wednesday, the US releases Building Permits. The UK will release three key employment indicators – Average Earnings Index, Claimant Count Change and the unemployment rate.

On Tuesday, US consumer inflation numbers were mixed. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 64 percent. Meanwhile, US consumer spending impressed in September. Retail sales gained 0.5%, while core retail sales jumped 0.6%, as both key indicators rebounded from declines in August. PPI was steady at 0.3%, but the UoM Consumer Sentiment Index disappointed, dropping to 87.9 points and missing expectations. This marked the weakest reading since September 2015.

Despite gloomy predictions about the effect Brexit would have on the British economy, the country’s third quarter numbers have generally been satisfactory. However, on Friday the BoE released its credit conditions survey, which found less demand in Q3 for mortgages and a fall in demand for credit for house purchasing and for business needs. With Britain poised to leave the EU following the Brexit vote in June, the two sides will have to sit down and haggle over the myriad of details that will come with the historic breakup. A likely sticking point will be the question of the EU budget liabilities and what constitutes Britain’s portion. The EU estimates shared liabilities of over EUR 300 billion and that Britain will have to assume EUR 20 billion. Britain, for its part, is unlikely to simply pay this bill and a deadlock over this issue could derail a new trade deal between the UK and the continent, ultimately hurting the Eurozone and UK economies.

GBP/USD Fundamentals

Tuesday (October 18)

• 4:30 British CPI. Estimate 0.9%. Actual 1.0%
• 4:30 British PPI Input. Estimate 0.4%. Actual 0.0%
• 4:30 British RPI. Estimate 2.0%. Actual 2.0%
• 4:30 British Core CPI. Estimate 1.4% Actual 1.5%
• 4:30 British HPI. Estimate 7.9%. Actual 8.4%
• 4:30 British PPI Output. Estimate 0.2%. Actual 0.2%
• 8:30 US CPI. Estimate 0.3%. Actual 0.2%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
• 10:00 US NAHB Housing Market Index. Estimate 64 points
• 16:00 US TIC Long-Term Purchases

Wednesday (October 19)

• 4:30 British Average Earnings Index. Estimate 2.3%
• 4:30 British Claimant Count Change. Estimate 3.4%
• 4:30 British Unemployment Rate. Estimate 4.9%
• 8:30 US Building Permits. Estimate 1.17M

*All release times are EDT

* Key events are in bold

GBP/USD for Tuesday, October 18, 2016

GBP/USD October 18 at 9:20 EDT

Open: 1.2218 High: 1.2304 Low: 1.2215 Close: 1.2297

GBP/USD Technical

• GBP/USD posted slight gains in the Asian session and continued to move higher in the European session. The pair has posted further gains  in North American trade
• 1.2120 is providing support
• There is resistance at 1.2447

Further levels in both directions:

• Below: 1.2120, 1.1954 and 1.1844
• Above: 1.2447, 1.2525 and 1.2612
• Current range: 1.2120 to 1.2447

OANDA’s Open Positions Ratio

GBP/USD ratio is showing long positions with a strong majority (63%). This is indicative of trader bias towards GBP/USD continuing to move to higher ground.

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.