GBP/USD – Pound Slips as Carney Spooks Markets

The British pound has posted considerable losses in the Tuesday session. In North American trade, GBP/USD is trading at 1.3223, down 0.66% on the day. On the release front, the Bank of England published the results of its bank stress tests and the semi-annual Financial Stability report. In the US, CB Consumer Confidence jumped to 129.5, crushing the estimate of 123.9 points. In Washington, Fed Chair Designate Jerome Powell is testifying at his confirmation hearing before the Senate Banking Committee.

There was positive news from the banking sector on Tuesday, as all  seven major UK banks passed the BoE’s stress tests. This is a reliable indication that the banking sector is in decent shape, despite nagging concerns about the toll that Brexit could take the British economy. Still, investors were quick to seize on negative comments from BoE Governor Mark Carney, who warned that in the case of a “disorderly” Brexit, the financial sector would face “some quite material economic costs”. Carney’s warning has sent the pound lower on Wednesday. Prime Minister May is expected to improve on its offer for its Brexit divorce bill, which could smooth some feathers in Brussels. Until now, the Europeans had demanded EUR 60 billion, while the UK had countered with EUR 20 billion. Another headache for May is the issue of the border between Northern Ireland and Ireland and its status after Brexit. The DUP party, which is propping up May in parliament, does not want a hard border between Ireland and Northern Ireland. However, if Britain does not remain in a customs union with the EU after Brexit, the result would likely be a hard border, given that there would be different regulatory schemes in Ireland and Northern Ireland.

All eyes are on the Federal Reserve on Tuesday, as Jerome Powell is testifying before the Senate Banking Committee. Investors will be listening closely, as Powell faces questions from lawmakers about his plans as head of the powerful central bank. Powell is widely expected to maintain Janet Yellen’s cautious monetary stance, which has been marked by small, incremental rate hikes. Powell inherits an economy that is in excellent shape, but persistently low inflation remains a nagging problem. Fed policymakers have differing views on what to do about inflation, with some members proposing that the Fed drop its 2 percent target, in favor of a “gradually rising path” for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

GBP/USD Fundamentals

Tuesday (November 28)

• 2:00 British Bank Stress Test Results
• 2:00 BoE Financial Stability Report
• 2:00 British FPC Statement
• 2:30 BoE Governor Mark Carney Speaks
• 8:30 US Goods Trade Balance. Estimate -65.0B. Actual -68.3B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.5%. Actual -0.4%
• 9:00 US HPI. Estimate 0.6%. Actual 0.3%
• 9:00 S&P/CS Composite-20 HPI. Estimate 6.0%. Actual 6.2%
• 9:15 US FOMC Member William Dudley Speaks
• 9:45 US Fed Chair Designate Jerome Powell Speaks
• 9:59 US Richmond Manufacturing Index. Estimate 14. Actual 30
• 10:00 US CB Consumer Confidence. Estimate 123.9. Actual 129.5
• 10:15 US FOMC Member Patrick Harker Speaks
• 15:45 US Treasury Secretary Steven Mnuchin Speaks
• 19:01 British BRC Shop Price Index

Wednesday (November 29)

• 8:30 US Preliminary GDP. Estimate 3.3%
• 9:00 BOE Governor Mark Carney Speaks
• 10:00 US Fed Chair Janet Yellen Testifies
• 10:00 US Pending Home Sales. Estimate 1.1%

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, November 28, 2017

GBP/USD November 28 at 12:05 EDT

Open: 1.3317 High: 1.3359 Low: 1.3226 Close: 1.3223

GBP/USD Technical

GBP/USD ticked higher in the Asian session. The pair posted slight losses in European trade and has lost more ground in North American trade

• 1.3186 is providing support
• 1.3321 was tested earlier in resistance. It has strengthened following losses by GBP/USD on Tuesday

Further levels in both directions:

• Below: 1.3186, 1.3048 and 1.2930
• Above: 1.3321, 1.3402, 1.3503 and 1.3655
• Current range: 1.3186 to 1.3321

OANDA’s Open Positions Ratio

GBP/USD ratio is  showing movement towards short positions. Currently, short positions have a majority (54%), indicative trader bias towards GBP/USD continuing to move lower.

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.