GBP/USD – British Pound Steady, Markets Expect BoE to Stand Pat

The British pound continues to show little movement this week. In North American trade, GBP/USD is trading at 1.3574, up 0.19% on the day. On the release front, there are no major British indicators. In the US, PPI dropped to 0.1%, shy of the estimate of 0.2%. Core PPI edged lower to 0.2%, matching the forecast. On Thursday, the UK releases Manufacturing Production, and the US will publish consumer inflation reports.

The currency markets are not showing much movement after 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 Iran on one the one side, and US allies Israel and Saudi Arabia on the other are at a fever pitch, and any military confrontation involving these countries could shake up the markets.

Investors are keeping a close eye on the Bank of England, which will set the benchmark interest rate on Thursday. Just a few weeks ago, there were strong expectations that the bank was poised to raise rates by a quarter-point, but some weak releases have soured sentiment towards a rate hike. For example, Preliminary GDP in the first quarter gained only 0.1%, missing the forecast of 0.3 percent. The cautious BoE is expected to maintain rates at 0.50% on Thursday, as short-term interest rates are now pricing in less than a 10 percent probability of a rate increase. Analysts are circling August as the next likely date for a rate hike.

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GBP/USD Fundamentals

Wednesday (May 9)

• 5:35 British 10-year Bond Auction. Actual 1.61%
• 8:30 US PPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.2%
• 10:00 US Final Wholesale Inventories. Estimate 0.6%. Actual 0.3%
• 10:30 US Crude Oil Inventories. Estimate -0.2M. Actual -2.2M
• 13:01 US 10-year Bond Auction
• 19:01 British RICS House Price Balance. Estimate -1%

Thursday (May 10)

• 4:30 British Manufacturing Production. Estimate 0.2%
• 7:00 BoE Inflation Report
• 7:00 MPC Official Bank Rate Votes. Estimate 2-0-7
• 7:00 BoE Monetary Policy Summary
• 7:00 Official Bank Rate. Estimate 0.50%
• 4:30 British Goods Trade Balance. Estimate -11.2B
• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 219K

*All release times are DST

*Key events are in bold

GBP/USD for Wednesday, May 9, 2018

GBP/USD May 9 at 11:35 DST

Open: 1.3549 High: 1.3607 Low: 1.3499 Close: 1.3574

GBP/USD Technical

GBP/USD showed little movement in the Asian and European sessions. The pair has edged higher in North American trade

• 1.3494 is providing weak support
• 1.3613 is the next resistance line
• Current range: 1.3494 to 1.3613

Further levels in both directions:

• Below: 1.3494, 1.3402 and 1.3301
• Above: 1.3613, 1.3712, 1.3796 and 1.3901

OANDA’s Open Positions Ratio

GBP/USD ratio is showing slight movement towards long positions. Currently, long positions have a majority (64%), 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.