GBP/USD – British pound pauses after sharp gains

GBP/USD has recorded slight losses in the Thursday session, after sharp gains on Wednesday. In North American trade, the pair is trading at 1.2996, down 0.25% on the day. On the release front, British Net Lending to Individuals dropped to GBP 4.0 billion, missing the estimate of GBP 5.5 billion. This marked the lowest level since July 2016. Later in the day, the UK releases GfK Consumer Confidence, which is expected to come in at -10 points for a second straight month. In the U.S, Core PCE Price Index edged up to 0.2%, while Personal Spending remained pegged at 0.4%. Both indicators matched the forecasts. Unemployment claims rose to 213 thousand, just below the forecast of 214 thousand.

The British pound jumped on Wednesday, climbing 1.2% percent as it punched above the symbolic 1.30 line for the first time in three weeks.  Nervous investors, looking for some good news in the Brexit gloom, snapped up the pound after positive comments from Michel Barnier, chief Brexit negotiator for the EU. Barnier said that the bloc was prepared to offer Britain a special relationship, which could include foreign and security ties. At the same time, Barnier warned that “there is no single market a la carte”, referring to proposals by the U.K government to cherry pick, such as implementing new immigration rules while retaining access to the single market. With only seven months before the UK departs from the EU, there are a host of unresolved issues, including the Irish border. If there is no significant progress in the next few months, the pound could lose ground.

The U.S economy continues to sparkle. Preliminary GDP for Q2 was revised upwards to 4.2%, edging above the estimate of 4.0%. This reading was above the initial GDP release of 4.1% back in July. Growth in the second quarter was much stronger than in Q1, which posted a gain of 2.2%. Will the strong data continue in the third quarter? Consumer spending has been strong early in the quarter, but housing data has disappointed, with recent key indicators missing expectations. The strong GDP has not affected the likelihood of rate hikes in the second half of 2018. The Fed has already raised rates twice this year, and a September hike is practically a given, with the CME Group estimating the odds of a hike at 96%. The odds of a December hike currently stand at 70%.

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GBP/USD Fundamentals

Thursday (August 30)

• 4:30 British M4 Money Supply. Estimate 0.2%. Actual 0.9%
• 4:30 British Mortgage Approvals. Estimate 65K. Actual 65K
• 4:30 British Net Lending to Individuals. Estimate 5.5B. Actual 4.0B
• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.4%. Actual 0.4%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.3%
• 8:30 US Unemployment Claims. Estimate 214K. Actual 213K
• 10:30 US Natural Gas Storage. Estimate 58B. Actual 70B
• 19:01 British GfK Consumer Confidence. Estimate -10 

Friday (August 31)

• 10:00 US Revised UoM Consumer Sentiment. Estimate 95.5

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, August 30, 2018

GBP/USD August 30 at 12:05 DST

Open: 1.3028 High: 1.3043 Low: 1.2985 Close: 1.2996

GBP/USD Technical

GBP/USD showed little movement in the Asian session. The pair posted small gains in European trade and this trend has continued in the North American session.

• 1.2852 is the next support line
• 1.2996 is fluid. Currently, it is under pressure in resistance
• Current range: 1.2852 to 1.2996

Further levels in both directions:

• Below: 1.2852, 1.2706, 1.2589 and 1.2366
• Above: 1.2996, 1.3088 and 1.3173

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