GBP/USD – Pound Drops Sharply As US Numbers Sparkle

GBP/USD has posted sharp losses in Thursday trading, as the pair trades at the 1.63 line in the North American session. In economic news, the BOE held course and maintained the current QE and interest rate levels. In the US, GDP and Unemployment Claims both looked very sharp and easily surpassed the estimates.

There were no surprises from the BOE, which set the monthly QE and interest rates on Thursday. The Bank maintained QE at 375 billion pounds, while the benchmark interest rate remained pegged at 0.50%. In the Autumn Forecast Statement, UK Treasurer George Osborne said that the government’s economic policies had propelled the British economy, which has shown faster growth than any of the developed economies. The government has revised its growth forecast to 1.4% for 2013, double the 0.6% which was projected in March. For 2014, the growth is projected to hit 2.4%, up from 1.8%. The sharp economic growth has boosted confidence in the British pound, which has enjoyed excellent gains against the US dollar since mid-November.

On Wednesday, there was more good news from PMI data, as Construction PMI jumped to its highest level since August 2007. The key index climbed to 62.4 points, up from 59.4 points in the previous release. The sharp reading easily beat the estimate of 59.3 points. Construction PMI follows a strong Manufacturing PMI earlier in the week.

US data looked very sharp on Thursday. Unemployment Claims posted its lowest number in two months, dropping to 298 thousand. This easily beat the estimate of 328 thousand. Meanwhile, GDP, released each quarter, shot up to 3.6% in Q3, its sharpest gain in close to four years. The estimate stood at 3.0%. The excellent releases are likely to fuel speculation about when the Fed might step in with QE tapering.

GBP/USD for Thursday, December 5, 2013

GBP/USD December 5 at 16:20 GMT

GBP/USD 1.6306 H: 1.6404 L: 1.6301

GBP/USD Technical

• GBP/USD has lost ground in Thursday trading. The pair has been losing ground since the European session and has touched a low of 1.6301 in North American trading.
• The pair is testing support at the key line of 1.6300 and we could see this line fall during the day. This is followed by stronger support at 1.6231.
• On the upside, the pair faces resistance at 1.6476. This is followed by resistance at the round number of 1.6600, which has remained intact since August 2011.
• Current range: 1.6300 to 1.6476

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Thursday trading. This is not reflected in the pair’s current movement, as the pound has sustained sharp losses. Short positions continue to dominate the ratio, reflecting a trader bias towards the US dollar continuing to gain ground on the pound.

The US dollar has posted sharp gains following excellent employment and GDP data. If the pair drops below a key support line at 1.6300, we could see the pound continue to lose ground.

GBP/USD Fundamentals

• 11:15 British Autumn Forecast Statement.
• 12:00 BOE Asset Purchase Facility. Exp. 375B. Actual 375B.
• 12:00 BOE Official Bank Rate. Exp. 0.50%. Actual 0.50%.
• 13:30 US Preliminary GDP. Estimate 3.0%. Actual 3.6%.
• 13:30 US Unemployment Claims. Estimate 328K. Actual 298K.
• 13:30 US Treasury Secretary Jack Lew Speaks.
• 13:30 US Preliminary GDP Price Index. Estimate 1.9%. Actual 2.0%.
• 15:00 US Factory Orders. Estimate -0.9%. Actual -0.9%.
• 15:30 US Natural Gas Storage. Estimate -141B. Actual -162B.

*Key releases are highlighted in bold

*All release times are GMT

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