GBP/USD – Pound Jumps after Solid GBP Releases

GBP/USD has climbed almost one cent in Thursday trading. The pair was trading in the mid-1.51 range early in the North American session. The pound received a boost from some strong British releases. Retail Sales posted their sharpest gains in almost three years, and Public Sector Net Borrowing easily beat the market estimate. In the US, the Federal  Reserve kept a steady course, maintaining interest rate and QE levels. Unemployment Claims continued to look sharp, and the Philly Fed Manufacturing Index had its best performance in 2013. The fly in the ointment was Existing Home Sales, which failed to meet expectations.

On Thursday, there was plenty of data out of the UK and the US for the markets to analyze, and the news was mostly positive. The UK posted some strong numbers, led by Retail Sales, which jumped by 2.1%. This came after two straight declines, and blew past the estimate of a 0.5% gain. Public Sector Net Borrowing posted a deficit of GBP4.4 billion, unable to repeat the surplus we saw in February. However, this figure was much better than the forecast of GBP8.4 billion. The news was not as good from the UK manufacturing sector, as CBI Industrial Order Expectations continues to be mired deep in negative territory. The indicator came in at -15 points, just above the estimate of -16 points. In US releases, Unemployment Claims came in at 336 thousand, beating the estimate of 346 thousand. It marked the fourth straight week that Unemployment Claims has beaten market expectations.  The Philly Fed Manufacturing Index rose to 2 points, surprising the markets which had anticipated a drop to -1.6 points. The fly in the ointment was Existing Home Sales, which came in at 4.98 million, missing the estimate of 5.02 million.

In the US, there were no surprises from the US Federal Reserve, which announced that it was maintaining interest rates as well as the current round of asset purchases. The benchmark interest rate remains at 0%-0.25%, and the Fed will continue to purchase $85 billion in assets each month. There had been talk of the Fed modifying its monetary policy, with the US economy shown signs of improvement, such as lower unemployment and stronger consumer spending. However, Fed chief Bernanke said that the US labor market was still weak and also noted concern about recent tax increases and federal spending cuts.

Cyprus may be one of the Eurozone’s lightweights, but it continues to be in the financial headlines. What was supposed to be a routine bailout package for the island country has ballooned into a full-blown Eurozone financial crisis. The reason was a controversial bank levy provision in the agreement, which sent the currency markets spinning early in the week. This tax, which was aimed at all bank deposit holders, was intended to raise 5.8 billion euros, which would be a condition for Cyprus receiving the bailout funds. Cypriots were outraged, and on Tuesday, the Cypriot parliament voted overwhelmingly against the bailout. The government was not happy with the deal either, but had warned that rejecting the agreement could lead to a collapse of the nation’s banking sector. Meanwhile, the Eurozone is scrambling to salvage the bailout deal. German Chancellor Angela Merkel said she was ready to work with Cyprus to find a solution, and officials from the EU and IMF, who are the creditors behind the bailout, are in Cyprus for talks with the Cypriot government to discuss ways of making the bailout more palatable.

 GBP/USD for Thursday, March 21, 2013

1.5174 H: 1.5210 L: 1.5093

GBP/USD Technical

The pound has posted sharp gains, and climbed to the mid-1.51 level. The pair faces resistance at 1.5203. This line could face activity if the pound continues to push higher. This is followed by resistance at 1.5309. On the downside, there is support at 1.5138. Given the current volatility, this line cannot be considered safe. There is stronger support at 1.5053, which is protecting the all-important 1.50 level.

• Current range: 1.5138 to 1.5203

Further levels in both directions:

• Below: 1.5138, 1.5053, 1.4988, 1.4880 and 1.4818
• Above: 1.5203, 1.5309, 1.5392 and 1.5461

OANDA’s Open Positions Ratios

The GBP/USD ratio is showing strong activity, in the direction of long positions. This is reflective of what we are seeing in the movement of the currency pair, as the pound has posted strong gains against the dollar in Thursday trading. If the pound continues to push higher, we can expect movement in the ratio to continue as well.

Since falling below the 1.49 level last week, the pound has fought back, and now finds itself in the mid-1.51 range. The pound has made impressive gains on Thursday, buoyed by excellent Retail Sales numbers. However, the rally may be short-lived, as the UK economy is struggling, in sharp contrast to the situation in the US.

GBP/USD Fundamentals

• 9:30 British Retail Sales. Estimate 0.5%. Actual 2.1%
• 9:30 Public Sector Net Borrowing. Estimate 8.4B. Actual 4.4B
• 11:00 British CBI Industrial Order Expectations. Estimate -16 points. Actual -15 points
• 12:30 US Unemployment Claims. Estimate 343K. Actual 336K
• 13:00 US Flash Manufacturing PMI. Estimate 55.1 points. Actual 53.9 points
• 13:00 US HPI. Estimate 0.7%. Actual 0.6%
• 14:00 US Existing Home Sales. Estimate 5.02M. Actual 4.98M
• 14:00 US Philly Fed Manufacturing Index. Estimate -1.6 points. Actual 2.0 points
• 14:00 US CB Leading Index. Estimate 0.3%. Actual 0.5%.
• 14:30 US Natural Gas Storage. Estimate -70B. Actual -62B

*Key releases are highlighted in bold

*All release times are GMT

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.