GBP/USD – Pound Keeps Rolling, Shrugs off Weak Retail Sales

The British pound continues to post gains on Thursday. GBP/USD is trading just under the 1.61 line in the North American session. The pound shrugged off a decline in Retail Sales, one of the most important economic releases. Over in the US, Unemployment Claims came in higher than expected, while Trade Balance pointed to a wider deficit in October.

Today’s key releases out of the UK and the US all missed their estimates. British Retail Sales was a major disappointment, as the key consumer spending indicator posted a decline of -0.7%, compared to a gain of 0.6% the month before. This fell well short of the estimate of 0.0%. Over in the US, Unemployment Claims have been fairly steady over the past few weeks, but with speculation increasing about a possible December taper by the Federal Reserve, every employment release is under the markets microscope. The indicator showed little change with a reading of 339 thousand, but this was above the estimate of 331 thousand. There wasn’t any relief from Thursday’s other key release, Trade Balance. The October deficit widened to -$41.8 billion, compared to -$38.8 billion in September. This was well above the estimate of -$38.7 billion.

Incoming Federal Reserve head Janet Yellen will testify before the powerful Senate Banking Committee on Thursday. The hearing could be a rough one for Yellen, as Republicans are expected to grill her on the Fed’s QE program, which they oppose. Yellen is considered dovish in her monetary outlook and supported Bernard Bernanke in implementing QE, which currently stands at $85 billlion each month. On Wednesday, Yellen said that the economy is not performing up to its potential and unemployment remains too high.

British employment numbers were impressive on Wednesday, and the pound responded with a sharp rise. Claimant Count Change continues to post strong declines, with the October reading of -41.7K repeating the September figure. This easily beat the estimate of -33.2K. No less significant was the Unemployment Rate, which edged lower to 7.6%, its lowest level since June 2009. This has increased speculation that the BOE may lower rates earlier than its forecast of 2016. The Bank has said that unemployment must fall below 7.0% before it will act, and investors increasingly are of the opinion that this threshold will be reached in 2015. The always-cautious BOE has acknowledged the improving UK economy, and in Wednesday’s inflation report, referred to the economy as growing “robustly”.

GBP/USD for Thursday, November 14, 2013

GBP/USD November 14 at 16:20 GMT

GBP/USD 1.6098 H: 1.6099 L: 1.5989

GBP/USD Technical

• GBP/USD continues to move higher in Thursday trading. The pound has been climbing steadily since the European session.
• 1.6000 continues to provide support. This line has strengthened as the pair trades close to the 1.61 level. This is followed by support at 1.5877.
• On the upside, 1.6125 has weakened in resistance. Will the pound break through in the North American session? This line is followed by resistance at 1.6231.
• Current range: 1.6000 to 1.6125.

Further levels in both directions:

• Below: 1.6000, 1.5877, 1.5756 and 1.5645 and 1.5537
• Above: 1.6125, 1.6231, 1.6300 and 1.6476

OANDA’s Open Positions Ratio

GBP/USD ratio has reversed directions on Thursday, pointing to gains by short positions on Wednesday. This is not reflected in the current movement of the pair, as the pound continues to make inroads at the expense of the dollar. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar reversing direction and moving to higher ground.

The pound continues to move higher and is trading around the 1.61 line. We could see GDP/USD settle down in the North American session after posting gains earlier in the day.

GBP/USD Fundamentals

• 9:30 British Retail Sales. Estimate 0.0%. Actual -0.7%.
• 12:00 Federal Chairman Bernard Bernanke Speaks.
• 13:30 US Trade Balance. Estimate -38.7B. Actual -41.8B.
• 13:30 US Unemployment Claims. Estimate 331K. Actual 339K.
• 13:30 US Preliminary Non-Farm Productivity. Estimate 1.3%. Actual 1.9%.
• 13:30 US Preliminary Unit Labor Costs. Estimate 1.1%. Actual -0.6%.
• 15:00 Federal Reserve Chairperson-Designate Janet Yellen Testifies. Yellen will testify before the Senate Banking Committee.
• 15:30 US Natural Gas Storage. Estimate 21B.
• 16:00 US Crude Oil Inventories. Estimate 0.7M.
• 18:01 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

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