GBP/USD – Pound Moves Higher, Markets Eye US Job Openings

The British pound has posted considerable gains on Wednesday. GBP/USD is currently trading slightly below the 1.31 level. On the release front, NIESR GDP Estimate dipped to 0.3%. Later in the day, the UK will release RICS House Balance, which provides a snapshot of the level of activity in the housing sector. Over in the US, today’s highlight is JOLTS Job Openings. This important employment indicator is expected to edge higher to 5.52 million. On Thursday, the US will release Unemployment Claims.

Recent British data has not been encouraging, and the third quarter, which covers the post-Brexit period, could be dismal. NIESR GDP Estimate, a monthly report which helps predict official GDP releases, dropped to 0.3% in July, down from 0.6% a month earlier. Weak numbers on Tuesday pushed the pound below the symbolic 1.30 line. Manufacturing Production, a key indicator, declined 0.3%, short of the forecast of 0.0%. This report included the Bexit vote in June, and marked a second straight contraction. There was no relief from Trade Balance, as the trade deficit climbed to GBP 12.4 billion, compared to an estimate of GBP 9.6 billion. Britain’s decision to depart the EU has shaken the financial markets, and the economic fallout, which is just beginning to be measured, is expected to be significant. The BoE is trying to cushion the negative impact of Brexit, and the bank took dramatic action last week, cutting interest rates and expanding asset purchases in an attempt to stabilize the economy. BoE Governor Mark Carney has shown that he is willing to take decisive monetary action in order to bolster the British economy, and further rates cuts could follow prior to the end of the year. Last week’s service and manufacturing PMI reports pointed to contraction, and further soft data could batter the struggling British currency.

US July employment numbers looked strong, led by a banner Nonfarm Payrolls report. The July indicator surprised the markets with a huge gain of 255 thousand, crushing the estimate of 180 thousand. This release follows the outstanding June reading of 280 thousand. US wage growth has been a soft spot in the robust labor market, but there was positive news as Average Hourly Earnings gained 0.3%, edging above the forecast of 0.2%. As well, Unemployment Claims remained steady at 4.9%. What will the Federal Reserve do with these numbers? Prior to the payrolls release, a September hike was virtually off the table, especially in light of the soft US GDP report in late July. The Fed has made no secret of the fact that any rate move will be data-dependent, and the stellar job numbers will force to Fed to give serious thought to a move in September. Employment and inflation releases in the next few weeks will be critical factors in determining if the Fed makes a move next month, or waits until December before revisiting the rate question.

GBP/USD Fundamentals

Wednesday (August 10)

• 10:00 US JOLTS Job Openings. Estimate 5.52M
• 10:30 US Crude Oil Inventories. Estimate -1.3M
• 13:01 US 10-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -119.0B
• 19:01 British RICS House Balance

Upcoming Key Events

Thursday (August 11)

• 8:30 US Unemployment Claims. Estimate 272K

*Key releases are highlighted in bold

*All release times are EDT

GBP/USD for Wednesday, August 10, 2016

GBP/USD August 10 at 7:40 GMT

Open: 1.3011 High: 1.3094 Low: 1.3008 Close: 1.3079

GBP/USD Technical

• GBP/USD has posted gains in the Asian and European sessions
• 1.3064 was tested earlier in support and remains under pressure
• There is resistance at 1.3142

Further levels in both directions:

• Below: 1.3064, 1.2938, 1.2778 and 1.2680
• Above: 1.3142, 1.3219 and 1.3372
• Current range: 1.3064 to 1.3142

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement on Wednesday. Long positions command a majority (57%), indicative of trader bias towards GBP/USD continuing to move to higher ground.

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.