GBP/USD – British pound gains ground on hawkish BoE stance

The British pound is almost unchanged in the Thursday session. In North American trade, GBP/USD is trading at 1.3253, up 0.62% on the day. On the release front, Britain’s budget deficit narrowed to GBP 3.4 billion, well below the estimate of GBP 5.1 billion. The Bank of England maintained the benchmark rate at 0.50%, but three policymakers voted in favor of a hike, surprising the markets. Later in the day, BoE Governor Mark Carney will deliver remarks at an event in London. Over in the U.S, key U.S indicators were mixed. The Philly Fed Manufacturing Index slid to 19.9 points, its lowest level since August. There was better news on the employment front, as unemployment claims remained unchanged at 218 thousand, beating the estimate of 220 thousand. On Friday, OPEC members meet in Vienna.

There were no surprises as the Bank of England held the course on interest rates, pegging the benchmark rate at 0.50% for a sixth straight month. However, the markets had expected the vote on rates to be 7-2, so the vote of 6-3 was unexpected and has boosted the British pound. Policymakers sounded optimistic about the economy, saying that the weak first quarter was a temporary event. The hawkish stance of the BoE has raised speculation that the Bank will press the rate trigger at the next policy meeting in August.

The escalating trade battle between the United States and China has boosted the U.S dollar but taken a toll on the British pound. The most recent round of the trade spat between China and the U.S started on Friday, when the U.S announced a 25 percent tariff on $50 billion in Chinese goods. After China responded with an identical move on U.S. imports, President Trump has now threatened to impose 10 percent tariffs on some $200 billion in Chinese goods. Not surprisingly, China has threatened to retaliate against this latest move. Trump has also slapped tariffs on steel and aluminum imports from the European Union, which directly affects British producers. If the trade war continues, the pound could be heading for further headwinds.

  (Update 1) Onwards and Upwards

  Oil falls -2% as OPEC nears deal to raise production

  GBP rallies on hawkish BoE

GBP/USD Fundamentals

Thursday (June 21)

• 4:30 British Public Sector Net Borrowing. Estimate 5.1B. Actual 3.4B
• 7:00 BoE Official Bank Rate Votes. Estimate 2-0-7. Actual 3-0-6
• 7:00 BoE Monetary Policy Summary
• 7:00 BoE Official Bank Rate. Estimate 0.50%. Actual 0.50%
• 7:00 BoE Asset Purchase Facility. Estimate 435B. Actual 435B
• 7:00 BoE Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9
• 8:30 US Philly Fed Manufacturing Index. Estimate 28.3. Actual 19.9
• 8:30 US Unemployment Claims. Estimate 220K. Actual 218K
• 9:00 US HPI. Estimate 0.3%. Actual 0.1%
• 10:00 US CB Leading Index. Estimate 0.4%. Actual 0.2%
• 10:30 US Natural Gas Storage. Estimate 85B. Actual 91B
• Tentative – US Bank Stress Test Results
• 16:15 BoE Governor Carney Speaks

Friday (June 22)

• All Day – OPEC Meetings

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, June 21, 2018

GBP/USD June 21 at 11:15 DST

Open: 1.3170 High: 1.3270 Low: 1.3102 Close: 1.3253

GBP/USD Technical

GBP/USD edged lower in the Asian session. In European trade, the pair moved lower but then reversed directions and posted gains. GBP/USD has recorded slight gains in North American trade

• 1.3186 has switched to support following gains by GBP/USD on Thursday
• 1.3263 was tested earlier in resistance. It could break in the North American session
• Current range: 1.3088 to 1.3186

Further levels in both directions:

• Below: 1.3088, 1.2996 and 1.2909
• Above: 1.3186, 1.3398, 1.3494 and 1.3613

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