GBP/USD – Pound Shrugs Off Soft GDP Report

The British pound has posted slight gains in the Thursday session. In North American trade, GBP/USD is trading at 1.3943, up 0.18% on the day. On the release front, British Second Estimate GDP for the fourth quarter remained unchanged at 0.4%, shy of the estimate of 0.5%. Preliminary Business Investment for Q4 dropped to 0.0%, missing the estimate of 0.5%. In the US, unemployment claims dropped to 222 thousand, well below the estimate of 230 thousand.

British GDP for Q4 was a disappointment, but the pound has managed to hold its own against the dollar. GDP was revised downwards to 0.4%, down from 0.5% in the initial estimate. Looking at growth for all of 2017, GDP was revised lower from 1.8% to 1.7%, its worst showing since 2012. The weak readings are being attributed to lower production and weaker consumer spending. Consumers are being squeezed by a weaker British pound as well as high inflation, which is running at a 3% clip, compared to the BoE target of 2%.

The Bank of England has been hinting that it could accelerate the pace of rate hikes, and this was further reinforced on Wednesday, as BoE Chief Economist Andy Haldane said that interest rates might need to climb faster than previously expected, in order to bring down inflation to the BoE’s target of 2 percent. The Bank has been reluctant to raise rates in order to lower inflation, but may be running out of options, as inflation hovers at 3 percent and continues to erode the purchasing power of consumers. The Bank has taken pains to be transparent with the markets, stating recently that the pace of rate hikes could be accelerated and larger hikes than previously forecast could be on the way.

GBP/USD Fundamentals

Thursday (February 22)

• 00:15 US FOMC Member Randal Quarles Speaks
• 4:30 British Second Estimate GDP. Estimate 0.5%. Actual 0.4%
• 4:30 British Preliminary Business Investment. Estimate 0.5%. Actual 0.0%
• 8:30 US Unemployment Claims. Estimate 230K. Actual 222K
• 10:00 US CB Leading Index. Estimate 0.7%. Actual 1.0%
• 10:00 US FOMC Member William Dudley Speaks
• 10:30 US Natural Gas Storage. Estimate -121B. Actual -124B
• 11:00 US Crude Oil Inventories. Estimate 2.2M. Actual -1.6M
• 12:10 US FOMC Member Raphael Bostic Speaks 

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, February 22, 2018

GBP/USD February 22 at 11:55 EDT

Open: 1.3917 High: 1.3959 Low: 1.3857 Close: 1.3939

GBP/USD Technical

GBP/USD ticked lower in the Asian and European sessions. The pair has reversed directions and moved higher in North American trade

• 1.3901 is providing support
• 1.4010 is the next resistance line

Current range: 1.3901 to 1.4010

Further levels in both directions:

• Below: 1.3901, 1.3809 and 1.3744
• Above: 1.4010, 1.4128, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Thursday session. Currently, short positions have a majority (55%), indicative of trader bias towards GBP/USD continuing to move to lower 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.