GBP/USD – British pound punches past 1.30 as greenback softens

GBP/USD has posted strong gains on Thursday, recovering from losses earlier in the week. In the North American session, the pair is trading at 1.3030, up 0.70% on the day. On the release front, there are no major British events. In the U.S, unemployment claims dropped to 207 thousand, better than the estimate of 214 thousand. On Friday, the focus will be on employment data, as the U.S releases wage growth and official nonfarm payrolls.

Prime Minister May has been fighting off domestic and external adversaries for weeks, so a well-received major speech may have saved her job at 10 Downing Street, at least for now. May addressed an enthusiastic crowd at the Conservative party conference on Wednesday, declaring that she very much wanted a Brexit deal with Europe, but not at any price. May has been unsuccessful in trying to sell her “Chequers” proposal to the EU, and many Conservative party members feel her proposal leaves Brussels in charge of much of Britain’s economic policy. With a March 2019 deadline for Brexit, major gaps remain between the UK and the EU, such as what kind of border arrangements will be put in place between Northern Ireland and Ireland. Europeans leaders such as French President Emmanuel Macron have openly said that Britain must pay a price to leave the club, and there is growing concern that the two sides will be unable to reach an agreement before the March deadline. Such a scenario would be a nightmare for British businesses and could send the pound into a tailspin.

U.S job numbers continue to look sharp, reflective of a red-hot labor market. Unemployment claims dropped from 214 thousand to 207 thousand. This release comes on the heels of ADP nonfarm payrolls, which jumped 230 thousand in September. This marked the strongest increase in private sector jobs since March. Can the labor market keep up its dizzying pace? We could see some soft numbers as early as Friday, based on markets forecasts. Wage growth is expected to drop from 0.4% to 0.3%, while nonfarm payrolls is forecast to fall from 201 thousand to 185 thousand. Traders should be prepared for some movement in the currency markets during Friday’s North American session.

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GBP/USD Fundamentals

Thursday (October 4)

• 7:30 US Challenger Job Cuts. Actual 70.9%
• 8:00 British Housing Equity Withdrawal. Estimate -6.5B. Actual -6.3B
• 8:30 US Unemployment Claims. Estimate 214K. Actual 207K
• 9:15 US FOMC Member Randal Quarles Speaks
• 10:00 US Factory Orders. Estimate 2.2%. Actual 2.3%
• 10:30 US Natural Gas Storage. Estimate 47B

Friday (October 5)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change 185K
• 8:30 US Unemployment Rate. Estimate 3.8%

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, October 4, 2018

GBP/USD October 4 at 10:50 DST

Open: 1.2939 High: 1.3042 Low: 1.2922 Close: 1.3030

GBP/USD Technical

GBP/USD was flat in the Asian session. The pair posted gains in European trade and continues to move higher in North American trade

• 1.2966 has switched to a support role following gains by GBP/USD on Thursday
• 1.3088 is the next resistance line
• Current range: 1.2966 to 1.3088

Further levels in both directions:

• Below: 1.2966, 1.2852 and 1.2723
• Above: 1.3088, 1.3173, 1.3301, 1.3458

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