GBP/USD – Little Change As BOE Maintains Monetary Course

GBP/USD is having a quiet day, as the pair trades in the low-1.63 range in Thursday’s North American session. As expected, the Bank of England held the course with the QE and interest rate levels for February. Halifax HPI posted a strong gain and matched the estimate. Over in the US, Unemployment Claims dropped nicely and beat the estimate. However, the trade deficit widened in January and fell short of the forecast.

In the US, Unemployment Claims dropped to 331 thousand, down from 348 thousand in the previous release. This was good enough to beat the estimate of 337 thousand. On Friday we’ll get a look at Non-Farm Payrolls, which follows a very disappointing ADP Nonfarm Employment Change. This key release could dictate whether the Federal Reserve goes ahead with a third QE taper in February. The Federal Reserve has scaled down its bond-buying scheme with two tapers of $10 billion, reducing QE to $65 billion each month. The Fed would like to terminate the scheme by the end of 2014.

There were no surprises from the BOE, which kept its asset purchase facility and interest rate levels unchanged. QE remains pegged at 375 billion pounds, while the benchmark interest rate stays at 0.50%. With the British economy showing marked improvement, there is pressure on the BOE to raise interest rates, but Governor Mark Carney has balked until now. We’ll get a look at the BOE Inflation Report and the Unemployment Rate later in the month, and if these key indicators are positive, speculation will increase about a rate hike.

British PMIs were the focus this week. Services PMI dropped slightly to 58.3 points, missing the estimate of 59.1 points. Construction PMI looked very sharp, rising to 64.6 points, its highest level since August 2007. This easily beat the estimate of 61.6 points. Earlier in the week, Manufacturing PMI looked weak, dipping to 56.7 points and falling short of the estimate of 57.1 points. Is the hot British economy slowing down? If upcoming UK releases fall short of the forecast, the markets will likely get nervous and the pound could lose ground against the US dollar.

GBP/USD for Thursday, February 6, 2014

GBP/USD February 4 at 16:45 GMT

GBP/USD 1.6338 H: 1.6344 L: 1.6273

GBP/USD Technical

• GBP/USD is trading quietly in Thursday trading. The pair dropped to a low of 1.6287 in the European session but has pushed back above the 1.63 line.
• On the downside, 1.6329 is providing weak support. This is followed by support at 1.6244.
• 1.6416 is the next resistance line. This is followed by resistance at 1.6549.
• Current range: 1.6329 to 1.6416

Further levels in both directions:

• Below: 1.6329, 1.6231, 1.6125, 1.6050 and 1.60
• Above: 1.6416, 1.6549, 1.6705 and 1.6964

OANDA’s Open Positions Ratio

GBP/USD ratio has reversed directions on Thursday, pointing to gains in short positions. This is consistent with the pair’s movement, as  the pound has posted slight gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving to higher ground.

The pound continues to show little movement on Thursday. In the North American session, GBP/USD has edged higher.

GBP/USD Fundamentals

• 8:00 British Halifax HPI. Estimate 1.1%. Actual 1.1%.
• 9:30 BOE Asset Purchase Facility. Estimate 375B. Actual 375B.
• 9:30 BOE Official Bank Rate. Estimate 0.50%. Actual 0.50%.
• 12:30 US Challenger Job Cuts. Actual 11.6%.
• 13:30 US Trade Balance. Estimate -35.8B. Actual -38.7B. 
• 13:30 US Unemployment Claims. Estimate 337K. Actual 331K.
• 13:30 US Preliminary Nonfarm Productivity. Estimate 2.8%. Actual 3.2%.
• 13:30 US Preliminary Unit Labor Costs. Estimate -0.7%. Actual -1.7%.
• 15:00 US FOMC Member Daniel Tarullo Speaks.
• 15:30 US Natural Gas Storage. Estimate -270B. Actual -262B.

*Key releases are highlighted in bold

*All release times are GMT

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