GBP/USD – Higher As Manufacturing Output Sparkles

The British pound has gained ground in Thursday trading. In the North American session, the pair is trading in the mid-1.61 range. The pound got a boost from an outstanding CBI Industrial Order Expectations release, which jumped to its highest levels since 1995. Public Sector Net Borrowing posted a smaller deficit, but still missed the estimate. In the US, Unemployment Claims dropped to a seven-week low. PPI matched the forecast with a slight decline, while the Philly Fed Manufacturing Index plunged to a six-month low.

It was another busy day for US key releases. Unemployment Claims looked sharp, dropping to 323 thousand, compared to 339 thousand in the previous release. This was well below the estimate of 339 thousand. Inflation continues to look sluggish, as the Producer’s Price Index declined by 0.2%, the indicator’s second straight decline. The worst was saved for last, as the Philly Fed Manufacturing Index slumped to just 5.6 points, a remarkable drop from 19.6 the month before. This was way off the estimate of 15.8.

The news was much better over in the UK, as another important indicator hit a multi-year high. CBI Industrial Order Expectations jumped to 11 points in October, bouncing back from a weak reading of -4 points the month before. This was the manufacturing indicator’s best showing since 1995, and is another indication of a growing British economy.

The minutes of the Federal Reserve’s most recent policy meeting were released late Wednesday and the minutes indicated that the Fed is prepared to press the tapering trigger soon. Policymakers said the current QE level of $85 billion monthly purchases of bonds could taper “in coming months” if the economy continued to improve. A scaling down of QE is dollar-positive, so we could see the greenback continue to make gains against the major currencies. Earlier in the week, Fed chair Bernard Bernanke said that the employment market improvement was “meaningful” and that interest rates would likely remain low even after QE ends.

Also on Wednesday, the BOE’s Monetary Policy Committee voted unanimously (9-0) to maintain the current interest rate of 0.50% and QE at 375 billion pounds. These decisions and the voting breakdown were expected and did not attract much attention from the markets. However, the MPC tossed a monkey wrench when it stated that the record-low interest rate might be required even after unemployment rate falls below the 7% level. Previous statements by Governor Mark Carney implied that interest rates could be raised when unemployment dropped below this level, and improving employment numbers have raised speculation that we could see interest rate hikes as early as 2015. The BOE appears to be dampening markets expectations of a rate increase, given the slack in the economy.

GBP/USD for Thursday, November 21, 2013

GBP/USD November 21 at 16:30 GMT

GBP/USD 1.6161 H: 1.6163 L: 1.6073

GBP/USD Technical

• GBP/USD has posted gains on Thursday. The pair crossed above the 1.61 line during the European session and continues to gain ground in North American trading.
• 1.6125 continues to provide support. This is not a strong line and could face pressure if the dollar shows any improvement. This is followed by support at the key level of 1.6000.
• On the upside, 1.6231 is providing resistance. Next is the round number of 1.6300. This line was last tested in December 2012.
• Current range: 1.6125 to 1.6231.

Further levels in both directions:

• Below: 1.6125, 1.6000, 1.5877, 1.5756 and 1.5645
• Above: 1.6231, 1.6300, 1.6476 and 1.6600

OANDA’s Open Positions Ratio

GBP/USD ratio has reversed directions in Thursday trading and is pointing to gains in short positions. This is not reflected in the pair’s current movement as the pound has posted gains against the dollar. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar reversing directions and moving to higher ground.

The pair has moved higher on Thursday, buoyed by a superb manufacturing release. We could see the pound settle down during the North American session.

GBP/USD Fundamentals

• 9:30 British Public Sector Net Borrowing. Estimate 4.8B. Actual 6.4B.
• 11:00 British CBI Industrial Order Expectations. Estimate o points. Actual 11 points.
• 13:30 US PPI. Estimate -0.2%. Actual -0.2%.
• 13:30 US Unemployment Claims. Estimate 333K. Actual 323K.
• 13:30 US Core CPI. Estimate 0.1%. Actual 0.2%.
• 14:00 US Flash Manufacturing PMI. Estimate 52.6 points. Actual 54.3 points.
• 14:45 US FOMC Member Jerome Powell Speaks.
• 15:00 US Philly Fed Manufacturing Index. Estimate 15.8M. Actual 6.5 points.
• 15:30 US Natural Gas Storage. Estimate -34B. Actual -45B.
• 18:00 US FOMC Member James Bullard Speaks.

*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.