GBP/USD – British pound slips as trade jitters boost US dollar

The British pound is under pressure, as GBP/USD continues to lose ground. In Wednesday’s North American session, the pair is trading at 1.3137, down 0.65% on the day. In economic news, the Bank of England released its semi-annual Financial Stability report. British retail sales enjoyed a strong June, with CBI Realized Sales posting a gain of 32, crushing the estimate of 10 points. This marked the highest reading since April 2017. In the U.S,  economic data was weak. Durable goods indicators pointed to contraction, and Pending Home Sales came in at -0.5%, marking a second straight decline. This missed the estimate of a 0.4% gain. On Thursday, the U.S will publish Final GDP for the first quarter and unemployment claims. The U.K releases GfK Consumer Confidence.

European leaders are meeting for a crucial 2-day summit on Thursday, and one of the top items on the agenda will be Brexit. One thorny issue will be the status of the Irish border after Britain leaves the EU. European leaders had hoped to wrap up outstanding issues at the June meeting, but this clearly won’t happen. There have been various suggestions regarding a customs union arrangement between Ireland and Northern Ireland, but the May government is split on the issue, much to the frustration of EU leaders. If EU leaders do little more than bash the British over Brexit, investors could get more nervous about the lack of progress and this could weigh on the shaky British pound.

The slow pace of Brexit talks is a major worry for the business sector, who are clearly dismayed at the lack of uncertainty after Britain leaves the club. On Monday, auto giant BMW expressed concern about the “ongoing uncertainty” over the lack of clarity regarding future customs arrangements between Britain and the EU. A senior BMW executive said that if its vehicles were stopped at the border, the company could cease its production operations in the UK. These comments come on the heels of a similar warning from Airbus, which said that if a Brexit deal wasn’t reached, the company could close up shop in the UK. If Britain and the EU fail to make significant very soon, the alarm bells from the business sector will get louder and confidence in the British economy could nosedive and drag the pound lower.

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GBP/USD Fundamentals

Wednesday (June 27)

• 1:58 British Nationwide HPI. Estimate 0.3%. Actual 0.5%
• 5:30 BoE Financial Stability Report
• 5:30 BoE FPC Statement
• 5:30 BoE Governor Mark Carney Speaks
• 6:00 British CBI Realized Sales. Estimate 10. Actual 32
• 8:30 US Core Durable Goods Orders. Estimate 0.5%. Actual -0.3%
• 8:30 US Durable Goods Orders. Estimate -0.9%. Actual -0.6%
• 10:00 US Pending Home Sales. Estimate 0.4%. Actual -0.5%
• 10:30 US Crude Oil Inventories. Estimate -2.4M. Actual -9.9M
• 11:00 US FOMC Member Quarles Speaks

Thursday (June 28)

• 8:30 US Final GDP. Estimate 2.2%
• 8:30 US Unemployment Claims. Estimate 220K

*All release times are DST

*Key events are in bold

GBP/USD for Wednesday, June 27, 2018

GBP/USD June 27 at 11:45 DST

Open: 1.3224 High: 1.3234 Low: 1.3134 Close: 1.3138

GBP/USD Technical

GBP/USD was flat in the Asian session. The pair posted considerable losses in European trade and has ticked lower in the North American session

• 1.3088 is providing support
• 1.3186 has switched to a resistance role after losses by GBP/USD on Wednesday
• Current range: 1.3088 to 1.3186

Further levels in both directions:

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

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