GBP/USD – British Pound Loses Ground as BoE Maintains Rates

The British pound has lost ground on Thursday, after showing little movement during the week. In the North American session, GBP/USD is trading at 1.3480, down 0.49% on the day. On the release front, it’s a busy day on both sides of the pond. British Manufacturing Production declined for a second straight month. The reading of -0.1% was just above the forecast of -0.2%. Britain’s trade deficit widened to GBP -12.3 billion, above the estimate of -11.2 billion. As expected, the Bank of England held the course on monetary policy, maintaining interest rates at 0.50%. In the US, unemployment claims dropped to 211 thousand, easily beating the estimate of 219 thousand. US inflation numbers were not as strong. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. On Friday, the key event is UoM Consumer Sentiment.

Market predictions about the Bank of England were on the money, and the pound has showed little reaction on Thursday. As expected, the BoE held rates at 0.50%, with only two of nine MPC members voting for a rate hike. In the inflation report, policymakers noted concern over softness in consumer borrowing and the housing market. The markets were not surprised by the BoE decision, given the fact that first-quarter growth was just 0.1% and consumer spending an inflation levels weakened. Policymakers are hopeful that economic growth will rebound in Q2, and are adopting a wait-and-see attitude towards rate hikes, with a rate hike unlikely before August, which is when the next inflation report will be released.

The markets continue to digest the fallout from President Trump’s dramatic speech on Tuesday. Trump announced that the US would withdraw from the Iran nuclear deal. Trump blasted the agreement and said that the US would impose stiff sanctions on Iran. However, Britain, France and Germany have said they plan to remain in the deal, and will be holding a high-level meeting with Iranian leaders on how the agreement can be salvaged. With the US acknowledging that the White House does not have a ‘Plan B’, it’s unclear what happens next. Meanwhile, tensions between Israel and Iran are at a fever pitch after Israel struck dozens of military targets in Syria on Tuesday. If there are further military skirmishes involving these countries, the currency markets could show strong volatility.

GBP Slips as BoE Delays Hike and Lowers Forecasts

GBP/USD Fundamentals

Thursday (May 10)

• 4:30 British Manufacturing Production. Estimate -0.2%. Actual -0.1%
• 4:30 British Goods Trade Balance. Estimate -11.2B. Actual -12.3B
• 4:30 British Construction Output. Estimate -2.1%. Actual -2.3%
• 4;30 British Industrial Production. Estimate 0.1%. Actual 0.1%
• 7:00 BoE Inflation Report
• 7:00 MPC Official Bank Rate Votes. Estimate 2-0-7. Actual 2-0-7
• 7:00 BoE Monetary Policy Summary
• 7:00 BoE Official Bank Rate. Estimate 0.50%. Actual 0.50%
• 7:00 British Asset Purchase Facility. Estimate 435B. Actual 435B
• 7:00 British MPC Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9
• 7:01 British NIESR GDP Estimate. Actual 0.1%
• 8:30 Unemployment Claims. Estimate 219K. Actual 211K
• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 219K
• 10:30 US Natural Gas Storage. Estimate 81B
• 13:01 US 30-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate 201.2B

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, May 10, 2018

GBP/USD May 10 at 10:25 DST

Open: 1.3547 High: 1.3618 Low: 1.3473 Close: 1.3475

GBP/USD Technical

GBP/USD edged lower in the Asian session. In European trade, the pair edged upwards but then retracted and gave up these gains. The pair continues to lose ground in North American trade

• 1.3402 is providing weak support
• 1.3494 has switched to a resistance role after losses by GBP/USD on Thursday. It is a weak line
• Current range: 1.3402 to 1.3494

Further levels in both directions:

• Below: 1.3402, 1.3301 and 1.3186
• Above: 1.3494, 1.3613, 1.3712 and 1.3796

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Thursday session. Currently, long positions have a majority (65%), indicative of trader bias towards GBP/USD reversing directions and moving upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.