GBP/USD – Pound Recovers and Flirts with 1.67

The pound has posted gains on Thursday, as the US dollar exhibits broad weakness against its major rivals. In the North American session, GBP/USD is trading slightly below the 1.67 level. It was a busy day in the US, with positive news from the major events. Unemployment Claims dropped and easily beat the estimate. Retail Sales and Core Retail Sales both improved in February and met market expectations. The only British release of the day was RICS House Price Balance, a minor event. The indicator weakened in February, slipping to a six-month low.

In the US, concerns about the job market eased after a solid Unemployment Claims release on Thursday. The key indicator dropped to 315 thousand, down from 323 thousand the previous week. This beat the estimate of 334 thousand. This was the second straight drop for the key employment indicator. Core Retail Sales and Retail Sales both posted gains of 0.3%, which were within market expectations. These indicators are the primary gauges of consumer spending, and although the gains were modest, they mark an improvement over the January readings.

With Nonfarm Payrolls improving and Unemployment Claims dropping, the markets can breathe more comfortably as the Fed is likely to take its scissors and trim QE next week for the third time. New York Fed President William Dudley stated last week that the threshold to alter the Fed’s program to wind up QE was “pretty high”. In other words, short of a serious economic downturn in the US economy, we can expect the QE tapers to continue.

Testifying before parliament earlier in the week, BOE Governor Mark Carney reiterated that the Bank was in no rush to raise interest rates, noting that the economy may have spare capacity of up to 1.5% of GDP. Carney stated that any increase in rates would be done gradually and to a limited extent. With the UK economy continuing to expand, Carney continues to dampen expectations about any rate increases to prevent the economy from overheating. Meanwhile, other policy makers differ with Carey’s forecast of spare capacity. Martin Weale, a member of the BOE’s Monetary Policy Committee stated that the economy’s slack is under the 1.0% level. The divergence in opinion could indicate a split regarding future monetary policy and this could impact on the pound.

GBP/USD for Thursday, March 13, 2014

GBP/USD March 13 at 17:00 GMT

GBP/USD 1.6654 H: 1.6717 L: 1.6607

GBP/USD Technical

• GBP/USD has moved higher in Thursday trade. The pair broke above the 1.67 line in the European session but was unable to consolidate these gains.
• 1.6549 continues to provide support. This line has strengthened as the pound moves to higher levels. This is followed by support at 1.6416.
• On the upside, 1.6705 continues in a resistance role. Next, there is resistance at 1.6765.
• Current range: 1.6549 to 1.6705.

Further levels in both directions:

• Below: 1.6549, 1.6416, 1.6329 and 1.6236
• Above: 1.6705, 1.6765, 1.6896, 1.6964 and 1.7087

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long  positions in Thursday. This is consistent with what we are seeing from the pair, as the pound has posted gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing its current downward trend.

GBP/USD has posted gains on Thursday, but is showing some volatility and has lost ground in the North American session.

GBP/USD Fundamentals

• 00:01 British RICS House Price Balance. Estimate 52%. Actual 45%.
• 12:30 US Core Retail Sales. Estimate 0.2%. Actual 0.3%.
• 12:30 US Retail Sales. Estimate 0.3%. Actual 0.3%.
• 12:30 US Unemployment Claims. Estimate 334K. Actual 315K.
• 12:30 US Import Prices. Estimate 0.6%. Actual 0.9%.
• 14:00 US Business Inventories. Estimate 0.4%. Actual 0.4%.
• 14:00 US Federal Reserve Governor Nomination Hearings.
• 14:30 US Natural Gas Storage. Estimate -199B. Actual -195B.
• 17:01 US 30-year Bond Auction. Actual 3.63%.
• 18:00 US Federal Budget Balance. Estimate -223.2B.

*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.