GBP/USD – Pound Falls Below 1.23 on Soft UK Manufacturing PMI

GBP/USD has posted losses in the Wednesday session. In North American trade, GBP/USD is trading at 1.2320. Earlier on Wednesday, the pound fell below the 1.23 level for the first time since January 20. On the release front, British Manufacturing PMI disappointed, falling to 54.6. This missed the estimate of 55.7 points. In the US, key indicators were mixed. Personal Spending slipped to 0.2%, shy of the forecast of 0.3%. In the US, ISM Manufacturing PMI improved to 57.7, marking a sixth straight month that the index has risen higher.

There was plenty of anticipation in the air ahead of President Trump’s speech to Congress. In the end, however, the speech was short on specifics and the markets haven’t shown much reaction in the Wednesday session. Trump promised “massive” tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, “financed through both public and private capital”. Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we’ve seen in the past.

The dollar continues to make headway against the pound this week, thanks to hawkish statements from Federal Reserve policymakers. On Tuesday, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed, which has raised the odds of a March hike at 66%, according to Reuters. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for “serious consideration” at the March policy meeting. The markets will be listening closely to speeches from other FOMC members this week, culminating in speeches from Janet Yellen and Fed Governor Stanley Fischer on Friday.

On Tuesday, the BoE’s incoming deputy governor, Charlotte Hogg, told the treasury committee that Brexit remained the “most significant challenge” for monetary policymakers, noting that consumer spending could drop more sharply than forecast by the BoE. The British economy has weathered the Brexit storm fairly well, but BoE Governor Mark Carney continues to warn that Britain’s departure from the EU will take a toll on the economy, and his cautious stance was echoed by BoE Chief Economist Andy Haldane last week. Haldane warned that a sharp increase in market expectations for an interest rate could hurt the “fragile” economy. Haldane also expressed support for Carney’s neutral stance over interest rate movement. Although inflation levels have risen and are close to the BoE’s target of 2 percent, Carney has signaled that the BoE is in no rush to raise interest rates. Higher rates would boost the weak British pound, which has dropped a whopping 17 percent since the Brexit vote back in June 2016.

GBP/USD Fundamentals

Wednesday (March 1)

• 2:00 British Nationwide HPI. Estimate 0.2%. Actual 0.6%.
• 4:30 British Manufacturing PMI. Estimate 55.7. Actual 54.6
• 4:30 British Net Lending to Individuals. Estimate 4.0B. Actual 4.8B
• 4:30 British M4 Money Supply. Estimate -0.1%. Actual +0.9%
• 8:30 US Core PCE Price Index. Estimate 0.3%. Actual 0.3%
• 8:30 US Personal Spending. Estimate 0.3%. Actual 0.2%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.4%
• 9:45 US Final Manufacturing PMI. Actual 54.4
• 10:00 US ISM Manufacturing PMI. Estimate 56.2. Actual 57.7
• 10:00 US Construction Spending. Estimate 0.7%. Actual -1.0%
• 10:00 US ISM Manufacturing Prices. Estimate 68.5. Actual 68.0
• 10:30 US Crude Oil Inventories. Estimate 1.5M. Actual 1.5M
• All Day – US Total Vehicle Sales. Estimate 17.7M
• 13:00 US FOMC Member Robert Kaplan Speech
• 14:00 US Beige Book
• 18:00 US FOMC Member Lael Brainard Speech

Upcoming Key Events

Thursday (March 2)

• 8:30 US Unemployment Claims. Estimate 243K

*All release times are GMT

*Key events are in bold

GBP/USD for Wednesday, March 1, 2017

GBP/USD March 1 at 12:15 EST

Open: 1.2377 High: 1.2404 Low: 1.2279 Close: 1.2325

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair recorded strong losses in European trade and has posted small gains in North American trade
• 1.2272 is providing support
• 1.2351 was tested in resistance earlier

Further levels in both directions:

• Below: 1.2272, 1.2143 and 1.2033
• Above: 1.2351, 1.2471, 1.2579 and 1.2674
• Current range: 1.2351 to 1.2471

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement on Wednesday. Currently, long positions have a majority (64%), indicative of trader bias towards GBP/USD reversing directions 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.