GBP/USD – British pound climbs to 6-week high, shrugs off BoE warning

GBP/USD has posted gains on Thursday. In the North American session, the pair is trading at 1.3104, up 0.44% on the day. On the release front, there were key events on both sides of the pond. The Bank of England maintained rates at 0.75% in a unanimous (9-0) decision. In the U.S, key consumer inflation reports missed their mark. CPI came in at 0.2%, shy of the estimate of 0.3%. Core CPI dipped lower to 0.1%, missing the forecast of 0.2%. Unemployment claims sparkled with a reading of 203 thousand, beating the forecast of 213 thousand. On Friday, the U.S release retail sales and UoM Consumer Sentiment.

There were no surprises from the BoE, which held the benchmark rate at 0.75%. The Bank raised rates in August, for the only the second time since 2007. In the rate statement, policymakers noted that there had been little change on the domestic front since the August rate hike, but added that there was “greater uncertainty” in the financial markets over the Brexit withdrawal next March. The BoE may decide to stay on the sidelines and hold rates until after the UK leaves the EU in March, in order to minimize the expected disruption that the Brexit will have on the British economy. A lack of rate hikes will make it tougher for the pound to gain, unless the UK economy shows stronger growth than expected.

In the U.S, the red-hot labor market continues to be the envy of industrialized countries around the globe. The unemployment rate is at a remarkable 3.8% and unemployment claims were almost unchanged at 204 thousand, another excellent reading. Despite the strong employment front and a booming economy, inflation remains well short of the Federal Reserve’s target of 2 percent. In August, CPI and Core CPI came in at 0.1% and 0.2%, respectively, falling short of their estimates. The markets are braced for soft consumer spending data on Friday, which could send the dollar lower.

GBP/USD Fundamentals

Thursday (September 13)

• 7:00 British MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9
• 7:00 British Monetary Policy Summary
• 7:00 British Official Bank Rate. Estimate 0.75%. Actual 0.75%
• 7:00 British MPC Asset Purchase Facility. Estimate 435B. Actual 435B
• 7:00 British MPC Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9
• 8:30 US CPI. Estimate 0.3%. Actual 0.2%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Unemployment Claims. Estimate 210K. Actual 204K
• 10:00 US FOMC Member Randal Quarles Speaks
• 10:30 US Natural Gas Storage. Estimate 65B. Actual 69B
• 13:01 30-year Bond Auction
• 13:15 US FOMC Member Raphael Bostic Speaks
• 14:00 US Federal Budget Balance. Estimate -169.8B

Friday (September 14)

• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.4%
• 8:30 US Import Prices. Estimate -0.2%
• 9:15 US Capacity Utilization Rate. Estimate 78.3%
• 9:15 US Industrial Production. Estimate 0.3%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 96.7
• 10:00 US Business Inventories. Estimate 0.5%
• 10:00 Preliminary UoM Inflation Expectations

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, September 13, 2018

GBP/USD September 13 at 11:40 DST

Open: 1.3047 High: 1.3123 Low: 1.3027 Close: 1.3104

GBP/USD Technical

GBP/USD was flat in the Asian session and showed limited movement in European trade. The pair has posted gains in the North American session

• 1.3088 has switched to a support role after gains by GBP/USD on Thursday. It is a weak line
• 1.3173 is the next resistance line
• Current range: 1.3088 to 1.3173

Further levels in both directions:

• Below: 1.3088, 1.2966, 1.2852, 1.2706
• Above: 1.3173, 1.3301 and 1.3458

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