GBP/USD – Pound Slips on Gloomy BoE Minutes

GBP/USD has lost ground in the Thursday session. In North American trade, GBP/USD is trading at 1.2881. On the release front, it’s been a very busy day. The Bank of England maintained the benchmark rate at 0.25%, but the minutes of the May policy meeting were pessimistic. There was more bad news as Manufacturing Production declined 0.6%, worse than the forecast of -0.2%. US numbers were strong, as PPI improved to 0.5%, and unemployment claims ticked lower to 236 thousand. Both indicators beat their estimates.

As expected, the BoE made no changes to interest rates or its asset-purchase scheme. However, the BoE stated in its minutes that it expected living standards to drop, as it downgraded its forecast for average earning growth to 2%, down from 3% in February. On the inflation front, the BoE raised its projection for inflation in Q1 to 2.7%, compared to 2.4% in February. The Bank added that if inflation is higher than predicted, it might have to respond by raising interest rates. The minutes added that these forecasts were based on a “smooth” Brexit (which is by no means guaranteed, especially with the bad blood between the EU and Prime Minister Theresa May). Predictably, the gloomy message from the BoE has pushed the British pound lower in Thursday trade. A weak UK manufacturing production report is also weighing on the pound, and if upcoming data also misses expectations, the pound could continue to lose ground.

BoE’s Carney Sees Tougher Time for Households

Washington is in the grips of a major political crisis (some analysts are even calling it a constitutional crisis), following Trump’s firing of FBI director James Comey on Tuesday. Comey, who has been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign, clearly has been a thorn in Trump’s side. The White House has claimed that it fired Comey over his handling of an email scandal involving Hillary Clinton, but the move has been roundly condemned by the Democrats, and some key Republicans have also voiced opposition as well. The firestorm could heat up further, with calls in Congress to appoint an independent investigator into Trump’s connections with Russia. Has Trump gone one step to far? This latest controversy shows no signs of fading away anytime soon, and could delay Trump agenda of tax reform and increased fiscal spending.

GBP/USD Fundamentals

Thursday (May 11)

• 4:30 British Manufacturing Production. Estimate -0.2%. Actual -0.6%
• 4:30 British Goods Trade Balance. Estimate -11.7B. Actual -13.4B
• 4:30 British Construction Output. Estimate +0.3%. Actual -0.7%
• 4:30 British Industrial Production. Estimate -0.4%. Actual -0.5%
• 6:25 US FOMC Member Charles Dudley Speaks
• 7:00 BoE Inflation Report
• 7:00 MPC Official Bank Rate Votes. Estimate 1-0-8. Actual 1-0-7
• 7:00 BoE Monetary Policy Summary
• 7:00 BoE Official Bank Rate. Estimate 0.25%. Actual 0.25%
• 7:00 BoE Asset Purchase Facility. Estimate 435B. Actual 435B
• 7:00 MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-8
• 7:30 BoE Governor Mark Carney Speaks
• 8:04 British NIESR GDP. Actual 0.2%
• 8:30 US PPI. Estimate 0.2%. Actual 0.5%
• 8:30 US Unemployment Claims. Estimate 245K. Actual 236K
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.4%
• 10:30 US Natural Gas Storage. Estimate 52B. Actual 45B
• 13:01 US 30-y Bond Auction

Friday (May 12)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.6%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 97.0

*All release times are EDT

*Key events are in bold

GBP/USD for Thursday, May 11, 2017

GBP/USD May 11 at 12:00 EDT

Open: 1.2938 High: 1.2949 Low: 1.2849 Close: 1.2881

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair posted considerable losses in European trade but has moved slightly higher in the North American session
• 1.2865 is providing weak support
• 1.2946 is the next resistance line

Further levels in both directions:

• Below: 1.2865, 1.2706, 1.2571 and 1.2471
• Above: 1.2946, 1.3058 and 1.3121
• Current range: 1.2865 to 1.2946

OANDA’s Open Positions Ratio

GBP/USD ratio remains unchanged this week. Currently, short positions have a majority (65%), indicative of trader bias towards GBP/USD continuing to move lower.

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.