GBP/USD – Pound Rises on Brexit Minister Remarks

GBP/USD has posted considerable gains in the Thursday session. In North American trade, the pair is trading at the 1.26 line. The pound responded positively to comments by Brexit Minister David Davis who said that Britain would consider paying for access to the European single market. On the release front, UK Manufacturing PMI dipped to 53.4, short of the forecast of 54.4. In the US, unemployment claims climbed to 268 thousand, the highest level since July. The markets had expected a reading of 252 thousand. As well, ISM Manufacturing PMI improved to 53.2, beating the estimate of 52.1. On Friday, the UK releases Construction PMI. US Employment indicators will be in the spotlight, highlighted by US Nonfarm Payrolls, one of the most important indicators. Traders should be prepared for some volatility from GBP/USD on Friday.

On Wednesday, the Bank of England released its Financial Stability report, with the bank warning that the financial sector faces a challenging environment. The bank expressed its uneasiness over Donald Trump’s election as US president. The report said that “[t]he US election has reinforced existing vulnerabilities,”, citing the weak global economy and the high levels of debt affecting emerging market economies. Trump has said he will increase infrastructure spending and cut taxes, and the BoE is worried that this could lead to higher global inflation. In a follow-up press conference, BoE Governor Mark Carney said that Trump’s protectionist declarations could throw “sand in the gears” of the global economy and have adverse repercussions on the UK economy. The report also noted a warning about fallout from Brexit, saying it was essential that an “orderly transition” take place when Britain leaves the European Union.

The US economy continues to roll, as underscored by an excellent GDP report for the third quarter. Preliminary GDP sparkled in the third quarter, as the economy expanded 3.2%, above the forecast of 3.0%. The 3.2% gain was an upwards revision of Advance GDP, which came in at 2.9%. There was also good news on the consumer front. Solid consumer confidence numbers have been a critical factor in the US recovery, as stronger consumer confidence is linked to increased consumer spending. CB Consumer Confidence jumped to 107.1 points in November, surpassing the 100-level for the third time in four months. Last week, UoM Consumer Sentiment jumped to 93.8 points, its highest level since May. Donald Trump’s surprise election victory has not had an adverse effect on consumer confidence, and if these rosy numbers translate into stronger consumer spending, the US dollar could continue to climb against its rivals.

US Q3 GDP Revised Upward on Consumer Spending

GBP/USD Fundamentals

Thursday (December 1)

• 1:59 British Nationwide HPI. Estimate 0.2%. Actual 0.1%
• 4:30 British Manufacturing PMI. Estimate 54.4. Actual 53.4
• 7:30 US Challenger Job Cuts. Actual -13%
• 8:30 US Unemployment Claims. Estimate 252K. Actual 268K
• 9:45 US Final Manufacturing PMI. Estimate 53.9. Actual 54.1
• 10:00 US ISM Manufacturing PMI. Estimate 52.1. Actual 53.2
• 10:00 US Construction Spending. Estimate 0.6%. Actual 0.5%
• 10:00 US ISM Manufacturing Prices. Estimate 52.0. Actual 54.5
• 10:30 US Natural Gas Storage. Estimate -52B. Actual -50B
• All Day – US Total Vehicle Sales

Upcoming Key Events

Friday (December 2)

• 4:30 British Construction PMI. Estimate 52.3
• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 165K
• 8:30 US Unemployment Rate. Estimate 4.9%

*All release times are EST

* Key events are in bold

GBP/USD for Thursday, December 1, 2016

GBP/USD December 1 at 11:00 EST

Open: 1.2512 High: 1.2696 Low: 1.2505 Close: 1.2605

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair posted sharp gains in European trade. In the North American session, the pair posted gains but has retracted
• 1.2471 has switched to support following strong gains by GBP/USD
• 1.2620 was tested earlier in resistance and is a weak line

Further levels in both directions:

• Below: 1.2471, 1.2351, 1.2272 and 1.2120
• Above: 1.2620, 1.2778 and 1.2849
• Current range: 1.2471 to 1.2620

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement. Currently, long positions have a majority (59%), indicative of trader bias towards GBP/USD continuing to move 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.