GBP/USD: Dollar Improves on Strong Unemployment Claims

GBP/USD has posted losses on Thursday, as the pair trades in the low-1.71 range in the North American session. In the UK, there were no surprises from the BOE, which held QE and interest levels at their June levels. The British trade deficit widened last month, and Halifax HPI posted its third decline in four releases. In the US, Unemployment Claims sparkled, as the key indicator dropped to its lowest level in six weeks.

As widely expected, the BOE maintained its monetary course, making no changes to interest rate levels or its asset purchase scheme. The benchmark interest rate remains at 0.50%, while QE continues to be pegged at 375 billion pounds. With talk of a rate increase possibly before the end of the year, the markets will be interested in the voting breakdown of the MPC members regarding the interest rate level. If the vote was not unanimous, we could see some strong movement from the pound.

In the US, Unemployment Claims dropped, as employment data continues to impress. The key indicator dropped to 304 thousand, well below the estimate of 316 thousand. Employment numbers for June have looked sharp, led by a jump in Nonfarm Payrolls and a drop in the unemployment rate.  The strong employment numbers have increased speculation about an interest rate hike by the Federal Reserve, and remarks by Fed policymakers will be under the market microscope.

The Federal Reserve minutes did not shed much light on when the Fed plans to raise interest rates, but policymakers did agree to wind up the QE scheme by October. The asset purchase program flooded the economy with over $2 trillion, and the Fed has been steadily reducing the program since last December. Winding down QE will require several more tapers by the Fed, but that shouldn’t pose a problem, given the solid employment data the economy has been churning out.

GBP/USD for Thursday, July 10, 2014

GBP/USD July 10 at 19:20 GMT

GBP/USD 1.7123 H: 1.7168 L: 1.7105

GBP/USD Technical

• GBP/USD lost ground late in the Asian session and remained under pressure in European trading. The pair is steady in the North American session.
• 1.7000 continues to provide strong support.
• 1.7183 is the next resistance line. This is followed by 1.7228, which has held firm since October 2008.
• Current range: 1.7000 to 1.7183.

Further levels in both directions:

• Below: 1.7000, 1.6920, 1.6825 and 1.6700
• Above: 1.7183, 1.7228, 1.7383 and 1.7482

OANDA’s Open Positions Ratio

GBP/USD is pointing to gains in long positions in Thursday trade, continuing the trend we saw a day earlier. This is not consistent with the movement of the pair, as the pound has posted losses. A substantial majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to move higher.

GBP/USD Fundamentals

• 8:30 British Trade Balance. Estimate -9.0B. Actual -9.2B.
• 11:00 BOE Asset Purchase Facility. Estimate 375B. Actual 375B.
• 11:00 BOE Official Bank Rate. Estimate 0.50%. Actual 0.50%.
• 12:30 US Unemployment Claims. Estimate 316K. Actual 304K.
• 14:00 US Wholesale Inventories. Estimate 0.6%. Actual 0.5%.
• 14:30 US Natural Gas Storage. Estimate 92B. Actual 93B.
• 17:01 US 30-year Bond Auction.
• 20:30 US FOMC Member Stanley Fischer 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.