GBP/USD – Pound Showing Volatility After Weak UK Data

The pound is showing some movement on Tuesday, as GBP/USD trades in the mid-1.63 range in the North American session. On the release front, British BBA Mortgage Approvals softened, while the public sector deficit ballooned in August. In the US, HPI slipped to 0.1%, while the Richmond Manufacturing Index posted an excellent reading of 14 points, marking a 13-month high.

The pound started the week with gains and is holding steady despite some soft UK numbers on Tuesday. BBA Mortgage Approvals fell to 41.6 thousand, the indicator’s lowest level in a year. This was well short of the estimate of 42.9 thousand. Meanwhile, Public Sector Net Borrowing posted a deficit of GBP 10.9 billion. after recording a surplus a month earlier. This was higher than the estimate of GBP 10.3 billion.

US Existing Home Sales didn’t impress in August, slipping to 5.05 million, compared to 5.15 million in the previous release. This was way off the estimate of 5.21 million. The indicator had exceeded the estimate in the past three releases, so the weak numbers disappointed the markets. We’ll get a look at New Home Sales on Wednesday.

Scottish citizens went to the polls last week in a historic referendum on whether to secede from the United Kingdom. The markets had expected a very close vote, based on polls leading up to the vote. However, at the end of the day, the No side won the vote in convincing fashion, with 55% of the vote, versus 44% for the Yes side. There had been predictions of a financial downturn in the UK if Scotland had voted for independence or if the vote was extremely close. As well, a vote to secede would have raised thorny economic issues such as what currency would be used by an independent Scotland. There was a sense of tremendous sense of relief in British political and financial circles after the final votes were counted, as the United Kingdom will indeed remain united.

GBP/USD for Tuesday, September 23, 2014

GBP/USD September 23 at 15:25 GMT

GBP/USD 1.6360 H: 1.6416 L: 1.6303

GBP/USD Technical

• The pound lost ground in the Asian session. The pair reversed directions in European trading, breaking above resistance at 1.6382. The pair has retracted in the North American session.
• 1.6263 continues to provide strong support.
• On the upside, 1.6382 was breached but has recovered. This line could face more pressure during the day. 1.6484 is stronger.
• Current range: 1.6263 to 1.6382.

Further levels in both directions:

• Below: 1.6263, 1.6141, 1.6000 and 1.5864
• Above: 1.6382, 1.6484, 1.6605 and 1.6755

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Tuesday, reversing the direction seen a day earlier. This is not consistent with the pair’s movement, as the pound has shown almost no net movement, despite some volatility. The ratio currently has a majority of long positions, indicative of trader bias towards the pound moving to higher ground.

GBP/USD Fundamentals

• 8:30 British BBA Mortgage Approvals. Estimate 42.9K. Actual 41.6K.
• 8:30 British Public Sector Net Borrowing. Estimate 10.3B. Actual 10.9B.
• 13:00 US HPI. Estimate 0.4%. Actual 0.1%.
• 13:20 US FOMC Member Jerome Powell Speaks.
• 13:45 US Flash Manufacturing PMI. Estimate 58.1 points. Actual 57.9 points.
• 13:59 US Richmond Manufacturing Index. Estimate 10 points. Actual 14 points.
• 18:00 US FOMC Member Narayana Kocherlakota Speaks.

* Key releases are highlighted in bold

*All release times are GMT

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