GBP/USD – British pound quiet ahead of FOMC minutes

The British pound is showing little movement in the Thursday session. In North American trade, the pair is trading at 1.3224, down 0.05% on the day. On the release front, there are no major British events. In the U.S, employment data is in the spotlight. ADP nonfarm payrolls ticked lower, coming in at 177 thousand. This was well short of the estimate of 190 thousand. Unemployment Claims climbed to 231 thousand, higher than the estimate of 225 thousand. The ISM Non-Manufacturing PMI improved to 59.1, beating the estimate of 58.5 points. This marked a 4-month high. Later in the day, the FOMC will release the minutes of the June policy meeting. On Friday, the U.S releases official nonfarm payrolls and wage growth.

On Thursday, Bank of England Governor Mark Carney spoke at an event in Newcastle. Carney sounded optimistic about the economy, saying that he was pleased with recent economic data and dismissed a soft first quarter as being largely due to poor weather. Carney noted that consumer spending and confidence had “bounced back strongly”. Is Carney laying the groundwork for an August rate hike? The bank has hinted at a rate hike, but opted for the sidelines at the May and June meetings. BoE policymakers will want to see a string of strong data, as well as some clarity on the Brexit issue, before giving the green light to a rate hike.

It was a 3-for-3 sweep for British PMIs, as all three indicators beat their estimates. Earlier in the week, Manufacturing and Construction PMIs improved in June, with readings of 54.4 and 53.1, respectively. On Wednesday, Services PMI climbed to 55.1, beating the estimate of 54.0. The indicator has now improved for a third straight month. The PMIs are bellwethers of the British economy, and these releases point to sustained expansion across key sectors. At the same time, the lack of progress in the Brexit negotiations is a major source of concern and continues to weigh on British pound.

Investors are keeping an eye on the FOMC minutes from the June meeting, which will be published later on Thursday. The minutes could be a market-mover, as the Federal Reserve raised rates at the meeting for the second time this year. How many more hikes will we see in 2018? Policymakers appear split between three and four moves, as the U.S economy is booming, but the threat from escalating trade tensions has the Fed concerned. Investors will be looking for clues from the minutes as to Fed monetary policy in the second half of 2018. If the minutes are hawkish, the dollar could improve during the North American session.

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GBP/USD Fundamentals

Thursday (July 5)

• 4:30 British Housing Equity Withdrawal. Estimate -7.3B. Actual -6.7B
• 5:45 BoE Governor Mark Carney Speaks
• 7:30 US Challenger Job Cuts. Actual 19.6%
• 8:15 US ADP Nonfarm Employment Change. Estimate 190K. Actual 177K
• 8:30 US Unemployment Claims. Estimate 225K. Actual 231K
• 9:45 US Final Services. Estimate 56.5. Actual 56.5
• 10:00 US ISM Non-Manufacturing PMI. Estimate 58.3. Actual 59.1
• 11:00 US Crude Oil Inventories. Estimate -4.4M. Actual 1.2M
• 14:00 US FOMC Meeting Minutes

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, July 5, 2018

GBP/USD July 5 at 12:20 DST

Open: 1.3230 High: 1.3275 Low: 1.3205 Close: 1.3224

GBP/USD Technical

GBP/USD was flat in the Asian session. The pair edged higher in European trade but has given up those gains in the North American session

• 1.3186 was tested earlier in support
• 1.3263 is the next resistance line
• Current range: 1.3186 to 1.3263

Further levels in both directions:

• Below:  1.3186, 1.3088, 1.2996 and 1.2908
• Above: 1.3263, 1.3494 and 1.3613

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