GBP/USD – Pound Edges Higher as British, US GDP Reports Match Forecasts

GBP/USD is trading quietly on Friday, continuing the lack of movement which has characterized the pair all week. In the North American session, the pair is trading slightly above the 1.32 line. On the release front, British Second Estimate GDP posted a gain of 0.6% and the US Preliminary GDP showed a gain of 1.1%. Both readings matched the estimates. Later in the day, Fed chair Janet Yellen will deliver a speech at Jackson Hole. The week wraps up UoM Consumer Sentiment, a key consumer confidence indicator.

With both the US and the UK releasing second quarter GDP reports on Friday, market players could be forgiven for expecting some movement from GBP/USD. However, that has not been the case, as the pound shrugged off both GDP reports, which matched their estimates. As well, British Second Estimate GDP remained unchanged from the previous version (Preliminary GDP). Over in the US, Preliminary GDP came in at 1.1%, very close to the previous version (Advance GDP). There was good news from the Preliminary GDP Price Index, which posted a sharp gain of 2.3%, edging above the estimate of 2.2%.

Meanwhile, fears that fallout from the Brexit vote would herald the demise of the British economy have so far proven to be unfounded. The positive trend continued on Thursday, as CBI Realized Sales sparkled, with a reading of plus -9, crushing the estimate of minus -5. This indicates that consumer confidence remains strong despite Brexit. July and August releases across the economy have looked sharp, as inflation, employment and retail sales numbers all beat their estimates last week. The pound responded with strong gains, climbing 1.2 percent last week. The British economy passed an important economic report card with the respectable GDP release, and if the markets buy into the notion that the economy has weathered the Brexit storm, the pound could respond with gains.

A speech from Federal Reserve chair Janet Yellen will be closely followed on Friday, but the venue will be in scenic Wyoming rather than busy Washington, D.C. Yellen will address the Jackson Hole economic summit, where central bankers and other senior policymakers are gathered to discuss economic and monetary policy. The markets will be looking for clues about the timing of a rate hike, and if Yellen delivers, we could see an immediate reaction from the markets. Federal policymakers are divided over the timing of a rate hike, as some members want to respond to the US labor market, which is heading towards full capacity. Other members are concerned with rock-bottom inflation levels and feel it’s too early to raise rates. The markets have not fully priced a rate hike until 2017, but given that another rate increase is data-dependent, there is certainly a possibility of a rate hike later this year, if the economy picks up steam and inflation levels move higher.

GBP/USD Fundamentals

Friday (August 26)

• 4:30 British Second Estimate GDP. Estimate 0.6%. Actual 0.6%
• 4:30 British Preliminary Business Investment. Estimate -0.9%. Actual +0.5%
• 4:40 British Index of Services. Estimate 0.4%. Actual 0.5%
• 8:30 US Preliminary GDP. Estimate 1.1%. Actual 1.1%
• 8:30 US Goods Trade Balance. Estimate -62.3B. Actual -59.3B
• 8:30 US Preliminary GDP Price Index. Estimate 2.2%. Actual 2.3%
• 10:00 Federal Reserve Chair Janet Yellen Speaks
• 10:00 US Revised UoM Consumer Sentiment. Estimate 90.6
• 10:00 US Revised UoM Inflation Expectations
• All Day – Jackson Hole Symposium

*All release times are EDT

* Key events are in bold

GBP/USD for Friday, August 26, 2016

GBP/USD August 26 at 9:40 GMT

Open: 1.3191 High: 1.3233 Low: 1.3181 Close: 1.3215

GBP/USD Technical

• GBP/USD showed limited movement in the Asian and European session. The pair is unchanged early in North American trade
• 1.3142 is providing support
• 1.3219 is under strong pressure in resistance and could break in the North American session

Further levels in both directions:

• Below: 1.3142, 1.3064 and 1.2938
• Above: 1.3219, 1.3327, 1.3480 and 1.3533
• Current range: 1.3142 to 1.3219

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement on Friday, consistent with the lack of movement from GBP/USD. Long positions have a slight majority (52%), indicative of slight lack trader bias towards GBP/USD breaking out and moving upwards.

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.