GBP/USD – British Pound Under Pressure as UK Employment Data Falters

The British pound has posted losses in the Tuesday session. In the North American session, GBP/USD is trading at 1.3495, down 0.44% on the day. On the release front, UK employment numbers disappointed. Wage growth dropped to 2.6% in March, down from 2.8% a month earlier. This missed the estimate of 2.7%. Unemployment claims jumped to 31.2 thousand, well above the forecast of 13.3 thousand. The unemployment rate remained at 4.2%, matching the estimate. In the US, retail sales dipped to 0.3%, shy of the estimate of 0.4%. Core retail sales edged up to 0.3% but missed the forecast of 0.5%. On Wednesday, the US will release Housing Starts and Building Permits.

British employment numbers were a mixed bag on Tuesday. Unemployment claims and wage growth both missed their forecasts, but the unemployment rate remained steady, and the participation rate rose to 75.6%, the highest rate ever recorded. Policymakers at the Bank of England will have to digest the mixed job numbers, as the employment market and wage growth will be important factors in the bank’s thought process regarding rate future rate hikes. Weak economic numbers dissuaded the BoE from raising rates last week, but if second quarter data is stronger, the bank could press the rate trigger at its August meeting.

In the U.S, Retail sales reports were shy of the estimates in April, but investors preferred to focus on the positive, noting that both retail sales and core retail sales posted gains, as consumer spending is improving after a sluggish first quarter. A new concern is higher gas prices, which could put a dent in consumers’ wallets and hurt spending. Oil prices have hit their highest levels in over 3 years, and with the US leaving the Iran nuclear deal and escalating tensions in the Middle East, gasoline prices could remain at high levels.

Yields in focus, again

Rate Differentials and Trade Fears Handcuff Capital Markets  

GBP/USD Fundamentals

Tuesday (May 15)

• 4:30 British Average Earnings Index. Estimate 2.7%. Actual 2.6%
• 4:30 British Claimant Count Change. Estimate 13.3K. Actual 31.2K
• 4:30 British Unemployment Rate. Estimate 4.2%. Actual 4.2%
• 8:30 US Core Retail Sales. Estimate 0.5%. Actual 0.3%
• 8:30 US Retail Sales. Estimate 0.4%. Actual 0.3%
• 8:30 US Empire State Manufacturing Index. Estimate 15.1. Actual 20.1
• 10:00 US Business Inventories. Estimate 0.2%
• 10:00 US NAHB Housing Market Index. Estimate 70
• 12:45 US FOMC Member John Williams Speaks
• 16:00 US TIC Long-Term Purchases

Wednesday (May 16)

• 8:30 US Building Permits. Estimate 1.35M
• 8:30 US Housing Starts. Estimate 1.33M

*All release times are DST

*Key events are in bold

GBP/USD for Tuesday, May 15, 2018

GBP/USD May 15 at 11:00 DST

Open: 1.3556 High: 1.3572 Low: 1.3451 Close: 1.3495

GBP/USD Technical

GBP/USD inched lower in the Asian session and recorded further losses in European trade. The pair is steady in North American trade

• 1.3402 is providing support
• 1.3494 has switched to a resistance line following losses by GBP/USD. It is a weak line
• Current range: 1.3402 to 1.3494

Further levels in both directions:

• Below: 1.3402, 1.3301 and 1.3186
• Above: 1.3494, 1.3613, 1.3712 and 1.3796

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement in the Tuesday session. Currently, long positions have a majority (63%), indicative of trader bias towards GBP/USD continuing to head 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.