GBP/USD – Pound Rises As US GDP Slips

The British pound is once again on the move, as GBP/USD has posted gains on Wednesday. In the North American session, the pair is flirting with the 1.69 line trade. The pound has taken advantage of broad US dollar weakness following a shocker from US Advance GDP, as GBP/USD has climbed almost 100 points on the day. Also in the US, ADP Nonfarm Payrolls jumped last month, easily beating the estimate. In the UK, today’s sole event is a speech by MPC member Spencer Dale.

ADP Nonfarm Payrolls were released on Wednesday, ahead of the critical official NFPs later in the week. The news was positive, as the indicator jumped to 220 thousand, marking a four-month low. This easily beat the estimate of 203 thousand. Advance GDP couldn’t keep pace, as the key indicator’s upward swing came to a crashing halt, with a Q1 gain of just 0.1%, compared to a 3.2% reading in Q4. This was well off the estimate of 1.2%. Is the US economy stalling? The weak reading could be a result of a harsh winter, but this will be of little consolation to the markets, and the dollar has responded with losses against its major rivals, including the British pound.

The markets are keeping a close eye on the Federal Reserve, which will issue a policy statement later in the day. The Fed is expected to trim QE by another $10 billion, which would reduce the asset purchase scheme to $45 billion. If US numbers remain steady, the Fed plans to wind up QE before the end of 2014, at which time the guessing game of when interest rates might rise will begin in earnest. Meanwhile, further tapers to QE represent a vote of confidence in the US economy, so the greenback could post gains against the major currencies following another trim.

British Preliminary GDP, one of the most important economic indicators, posted a strong gain of 0.8% in Q4, just shy of the estimate of 0.9%. There are three versions of British GDP, and the Preliminary indicator is the earliest and the most important. The positive release points to continuing economic growth, and will likely lead to continuing speculation about a rate hike from the Bank of England, which is likely sometime in 2015, if not earlier.

US consumers appear to be optimistic about the economy, according to the latest consumer confidence data. CB Consumer Confidence, a key indicator, posted its second straight reading of 82.3 points in March. This was shy of the estimate of 82.9, but the indicator remains at high levels. Earlier in the week, the UoM Consumer Sentiment jumped to 84.1 points in March, beating the estimate of 83.2. It marked the indicator’s highest level since June. If this optimism continues and translates into increased consumer spending, this should bode well for the US economy.

GBP/USD for Wednesday, April 30, 2014

GBP/USD April 30 at 15:30 GMT

GBP/USD 1.6888 H: 1.6901 L: 1.6807

GBP/USD Technical

• GBP/USD has surged on Wednesday as it trades close to the 1.69 level.
• 1.6765 is providing the pair with strong support.
• On the upside, 1.6896 is being tested by the pair. Will this line hold back the surging pound? Next is the key resistance line of 1.70, which has held firm since August 2009.

Further levels in both directions:

• Below: 1.6765, 1.6705, 1.6549 and 1.6416
• Above: 1.6896, 1.70, 1.7210 and 1.7374

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions in Wednesday trading. With the pound posting strong gains this movement is a result of numerous open long positions being covered, resulting in an increased percentage of open short positions. A large majority of the open positions in the GBP/USD ratio are short, indicative of the dollar reversing its current downward trend.

The pound has posted strong gains, as it flirts with the 1.69 line.  GBP/USD continues to move higher in the North American session.

GBP/USD Fundamentals

• 12:15 US ADP Nonfarm Employment Change. Estimate 203K. Actual 220K.
• 12:30 US Advance GDP. Estimate 1.2%. Actual 0.1%.
• 12:30 US Advance GDP Price Index. Estimate 1.6%. Actual 1.3%.
• 12:30 US Employment Cost Index. Estimate 0.5%. Actual 0.3%.
• 13:45 US Chicago PMI. Estimate 56.6 points. Actual 63.0 points.
• 14:30 US Crude Oil Inventories. Estimate 1.3M. Actual 1.7M.
• 15:30 Bank of England Chief Economist Spencer Dale Speaks.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.

*Key releases are highlighted in bold

*All release times are GMT

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