GBP/USD – Pound Yawns as Construction PMI Almost Unchanged

GBP/USD has posted slight gains in the Friday session. Currently, the pair is trading at 1.2620. On the release front, British Construction PMI was almost unchanged, with a reading of 52.8 points. This beat the forecast of 52.3 points. In the US, employment indicators will be in the spotlight on Friday, highlighted by US Nonfarm Payrolls and the Canadian Employment Change. Traders should be prepared for volatility in the currency markets in the North American session.

British PMI reports were solid this week, pointing to slight expansion in the construction and manufacturing reports. Fourth quarter numbers have been respectable, as the economy continues to defy the doomsayers who predicted a huge toll from the Brexit vote. Still, there are rough seas ahead, as Britain must negotiate the terms of its departure from the European Union. Earlier this week, Brexit Minister David Davis sent the markets a reassuring message, stating that Britain would consider paying for access to the European single market.

Friday’s spotlight is on US employment reports. The US labor market has been red-hot and is close to capacity. Solid job numbers have boosted market expectations for a rate hike next week, which is considered a virtual certainty (the markets have priced in a rate hike at over 90%). Traders will want to keep a close eye on today’s indicators, as any unexpected readings can have a sharp impact on the currency markets. We could see mixed numbers, with Nonfarm Payrolls expected to improve to 177 thousand, while Average Hourly Earnings, which measure wage growth, is expected to dip to 0.2%. On Thursday, unemployment claims were unexpectedly high, climbing up to 268 thousand, the highest level since July. Still, the 4-week averages continue to point to very low levels for jobless claims.

NFP Still Important Despite Upcoming Rate Hike

GBP/USD Fundamentals

Friday (December 2)

• 4:30 British Construction PMI. Estimate 52.8. Actual 52.3
• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 177K
• 8:30 US Unemployment Rate. Estimate 4.9%
• 8:45 US FOMC Member Lael Brainard Speech
• 13:00 US FOMC Member Daniel Tarullo Speech

*All release times are EST

* Key events are in bold

GBP/USD for Friday, December 2, 2016

GBP/USD December 2 at 7:00 EST

Open: 1.2587 High: 1.2649 Low: 1.2565 Close: 1.2619

GBP/USD Technical

• GBP/USD posted slight gains in the Asian session and is showing limited movement in European trade
• 1.2471 is providing strong support
• 1.2620 is under strong pressure in resistance. This line could break in the North American session

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 (62%), 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.