GBP/USD – Unchanged Ahead of Key US Inflation, Job Data

GBP/USD is almost unchanged on Thursday, in sharp contrast to the pound rally on Wednesday, when GBP/USD surged over 200 points. There are no UK releases on Thursday. It’s another busy day in the US, with the markets keeping a close eye on Unemployment Claims and CPI. We’ll also get a look at manufacturing data, with the markets expecting a second straight decline from the Philly Fed Manufacturing Index. US inflation numbers have not impressed and a weak CPI reading could further dampen expectations of a rate hike in the US before the end of the year.

The pound was up sharply on Wednesday, boosted by a drop in the unemployment rate, which fell to 5.4% in September. This marks the lowest rate we’ve seen since 2008. Although unemployment claims were up in September, the markets chose to focus on the unemployment rate as well as a strong Average Earnings report of 3.0%, which was within expectations. The British economy is showing some signs of strength, but remains handicapped by negligible inflation levels. CPI, the primary gauge of consumer inflation, came in at -0.1% in September, shy of the estimate of 0.0%. 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. Still, the markets liked what they saw on Wednesday and the pound took full advantage.

Federal Reserve policymakers are strongly divided on the question of a rate hike in 2015. This was underscored on Monday by FOMC member Lael Brainard, who stated that the Fed should not raise rates before global economic conditions improve. Brainard noted that the Chinese slowdown has caused economic turmoil worldwide, and the US economy could lose steam due to weaker exports and weak global economic conditions. Clearly, Brainard is of the view that the Fed should take its time and proceed with caution. With global economic conditions unlikely to change anytime soon, a rate move may be on hold unless the US posts some key releases, such as GDP or employment numbers, which match or beat expectations.

A very different view was put forth earlier in the week by another FOMC member, Dennis Lockhart. Lockhart, considered a centrist on monetary policy, sounded more optimistic about a rate hike before the end of 2015. Lockhart did not rule out a rate hike in October, and added that the Fed would have more data to evaluate before its December policy meeting. With FOMC members sending out such conflicting messages, it is no wonder that the markets have been unable to get a handle on the timing of a rate hike, and this failure of the Fed to communicate a clear message to the Fed has hurt the US dollar, as we saw after the release of the Fed minutes last week.

GBP/USD Fundamentals

Thursday (Oct. 15)

• 12:30 US CPI. Estimate -0.2%.
• 12:30 US Core CPI. Estimate 0.1%.
• 12:30 US Unemployment Claims. Estimate 269K.
• 12:30 US Empire State Manufacturing Index. Estimate -7.3 points.
• 14:00 US Philly Fed Manufacturing Index. Estimate -1.8 points.
• 14:30 Fed FOMC Member William Dudley Speaks.
• 14:30 US Natural Gas Storage. Estimate 92B.
• 15:00 US Crude Oil Inventories. Estimate 2.2M.
• 19:30 US Federal Budget Balance. Estimate 93.8B.  

Upcoming Key Events

Friday (Oct. 16)

• 14:00 US Preliminary UoM Consumer Sentiment. Estimate 88.8 points.
• 14:00 US JOLTS Job Openings. Estimate 5.77M.

*Key releases are highlighted in bold

*All release times are GMT

GBP/USD for Thursday, October 15, 2015

GBP/USD October 15 at 11:45 GMT

GBP/USD 1.5364 H: 1.5374 L: 1.5252

GBP/USD Technical

• GBP/USD has showed very little movement in the Asian or European sessions.
• 1.5485 is a strong resistance line.
• 1.5341 remains a weak support level.
• 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 is showing little movement on Thursday, consistent with the lack of movement from the pair. Short and long positions are almost evenly split, as traders are not showing a bias as what direction the pair may take next.

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.