GBP/USD – Pound Jumps to 1.25, Markets Eye Autumn Forecast Statement

GBP/USD has started the trading week with strong gains. In the North American session, the pair is trading at the 1.25 line. On the release front, there are no indicators out of the UK or the US. On Tuesday, the UK will release Public Sector Net Borrowing and CBI Industrial Expectations.

It’s a very quiet start to the week, so the markets will have some time to focus on the Autumn Forecast Statement, which serves as a preview to the annual UK budget. This report will be closely watched, as it will detail the government’s forecast for the economy ahead of the Brexit negotiations. Analysts are bracing for a pessimistic report which will point to lower growth, higher inflation and a ballooning deficit. Since the Brexit vote, the economy has managed quite well, consistently putting up numbers which have beaten expectations. However, if the Autumn Forecast Statement points to serious trouble ahead as Britain prepares to leave the EU, the pound could weaken.

US key indicators were generally strong on Thursday, pointing to a strong economy. Unemployment Claims sparkled at 235 thousand, much lower than the estimate of 257 thousand. This marked the lowest weekly claims total since 1973. CPI matched expectations at 0.4%, but Core CPI came in at 0.1% shy of the estimate of 0.2%.  The Philly Fed Manufacturing Index dropped to 7.6 points, short of the forecast. On the housing front, Housing Starts remained unchanged at 1.23 million, above expectations.

U.S. Consumer Prices Post Largest Gain in 6 Months

The Federal Reserve was on center stage on Thursday, as Fed Chair Yellen’s appeared before a congressional committee. Yellen did not explicitly acknowledge that the Fed would raise rates at the December 13-14 policy meeting, but she did say that the rate hike would be “relatively soon”. Yellen make no mention of Donald Trump’s potential policies, which could include greater fiscal spending, as she reiterated that future rate hikes should be “gradual”. The odds of a rate hike next month currently stand at 95 percent. Commenting on Yellen’s testimony, Jonathan Wright, a former Fed economist, summed up market sentiment –  “a rate hike in December is a done deal, barring a significant surprise in the next jobs numbers or in financial markets”.

GBP/USD Fundamentals

Monday (November 21)

• There are no British or US releases on Monday

Tuesday (November 22)

• 4:30 British Public Sector Net Borrowing. Estimate 5.9B
• Tentative – British 10-year Bond Auction 
• 6:00 British CBI Industrial Expectations. Estimate -8 points

*All release times are EST

* Key events are in bold

GBP/USD for Monday, November 21, 2016

GBP/USD November 21 at 10:30 EST

Open: 1.2322 High: 1.2497 Low: 1.2311 Close: 1.2495

GBP/USD Technical

• GBP/USD was flat in the Asian and European sessions. The pair has  posted strong gains in North American session
• 1.2351 is providing strong support
• 1.2479 was tested earlier in resistance and is a weak line

Further levels in both directions:

• Below: 1.2351, 1.2272 and 1.2120
• Above: 1.2479, 1.2620 and 1.2778
• Current range: 1.2351 to 1.2479

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing long positions with a majority (58%), This is indicative of trader bias towards GBP/USD continuing to move 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.