GBP/USD – Slight Gains as US Markets Closed for Holiday

GBP/USD has posted slight gains on Monday, as the pair trades at 1.5360 in the European session. US markets are closed for Columbus Day, and there are no major releases out of the UK. So we’re unlikely to see much movement from the pair during the day. Three Fed Reserve FOMC members will speak on Monday, and the markets will be looking for some direction as to when the Fed might raise rates. We could see some stronger movement from GBP/USD on Tuesday, as the UK releases CPI, a key event.

Will the Federal Reserve press the trigger and raise rates in 2015? The markets had circled September as a likely candidate for a rate hike, but the Federal Reserve remained on the sidelines yet again. The Fed released the minutes of its September policy meeting last week, and indicated that the Fed does not feel that the timing is appropriate for a rate hike, but provided few clues as to when the Fed might take action. Policymakers cited concerns that the sluggish global economy could affect the US economy. With global economic conditions unlikely to change anytime soon, a rate move may be on hold unless the US posts some key releases which match or beat expectations. FOMC member Dennis Lockhart sounded somewhat optimistic about a rate hike in October or December, but noted that the domestic economy, especially consumer indicators, would have to be strong in order for the Fed to raise rates. Lockhart and two other FOMC members will be speaking on Monday, and the markets will be paying close attention.

There were no surprises from the BOE on Thursday, as the central bank maintained asset purchase (QE) and interest rate levels. The benchmark interest rate remains at 0.50%, where it has been pegged since 2009, and QE levels at 375 billion pounds. The voting breakdown of the September decisions on interest rate and QE levels were also as expected. Eight MPC members voted to hold rates at 0.50%, with one member, Ian McCafferty, voting in favor of a rate increase. The vote on QE was unanimous, with all 9 MPC members voting to hold levels at 375 billion pounds per year. The UK economy has been performing well and wage growth has risen, but a rate hike in the near future remains unlikely, given the persistently weak inflation levels.

Meanwhile, the ECB summary was cautious in tone, sounding much like the Fed minutes. The Eurozone is stuck with low growth and weak inflation, but the summary indicated that there are no plans to expand the current stimulus program, at least for now. Germany, the Eurozone’s largest economy, posted disappointing manufacturing and trade balance numbers in August. These weak numbers underscore growing concern that the global slowdown is affecting Germany, and investors are nervous that a contraction in the German economy could quickly affect the rest of the bloc and send the fragile Eurozone economy into a tailspin. Weakness in the Eurozone economy can result in nervous investors dumping their euros and pounds and seeking the safety of the US dollar.

GBP/USD Fundamentals

Monday (Oct. 12)

• 12:10 Federal Reserve FOMC Member Denis Lockhart Speaks.
• 13:00 BOE MPC Member Martin Weale Speaks.
• 13:30 British CB Leading Index.
• 14:30 Federal Reserve FOMC Member Charles Evans Speaks.
• 20:30 Federal Reserve FOMC Member Lael Brainard Speaks.
• 23:01 British BRC Retail Sales Monitor.

Upcoming Key Events

Tuesday (Oct. 13)

8:30 British CPI. Estimate 0.0%

CPI is the primary gauge of consumer inflation and one of the most important indicators. A reading below zero, indicative of deflation, could push the pound lower.

*Key releases are highlighted in bold

*All release times are GMT

GBP/USD for Monday, October 12, 2015

GBP/USD October 12 at 12:40 GMT

GBP/USD 1.5363 H: 1.5373 L: 1.5314

GBP/USD Technical

• GBP/USD was uneventful in the Asian session and has posted slight gains in the European session.
• 1.5485 remains a strong resistance line.
• 1.5341 is a weak support line and was tested earlier in the day.
• Current range: 1.5341 to 1.5485

Further levels in both directions:

• Below: 1.5341, 1.5269, 1.5163 and 1.5026
• Above: 1.5485, 1.5590 and 1.5660

OANDA’s Open Positions Ratio

GBP/USD ratio has shown slight movement towards long positions on Monday, consistent with small gains by the pair. Long positions continue to retain a majority (58%). This is indicative of trader bias towards the pound moving higher.

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.