GBP/USD – Edges Higher as UK Manufacturing PMI Improves

GBP/USD has edged higher in Wednesday trading. The pair continues to trade in the mid-1.55 level early in the North American session. There was positive news out of the UK, as the British Manufacturing PMI beat the estimate. In the US, key manufacturing and employment data disappointed, falling below expectations. The markets are keeping a close eye on the US Federal Reserve, as the FOMC will release a policy statement later today.

The UK releases three PMIs this week, and the first one looked solid on Wednesday. Manufacturing improved from 48.3 points to 49.8, beating the estimate of 48.6 points. Nationwide HPI was less impressive, declining by 0.1%. The estimate stood at 0.3%. After a promising start to the week, the US fell back to its losing ways, with disappointing employment and manufacturing numbers. ADP Non-Farm Payrolls dropped to 119 thousand, well off the estimate of 154 thousand. The ISM Manufacturing PMI came in at 51.7 points, missing the estimate of 52.0 points. The weak numbers are weighing on the Australian dollar, as nervous investors stick with the safe-haven greenback. Meanwhile, the markets are keeping a close eye on the Federal Reserve, as the FOMC releases a statement at the end of a policy meeting. Policy makers are expected to maintain the current round of QE, which is US dollar negative. So, we could see some reaction from the currency markets following the FOMC release.

Will he or won’t he? This question is looming large, as the markets anxiously wait to see whether Mario Draghi and his colleagues at the ECB will press the trigger and lower in interest rates for the first time since last July. The Eurozone continues to stagnate with poor releases, highlighted by another record high for Eurozone Unemployment Rate, which edged to 12.1%, up from 12.0%. Speculation that the ECB will take action and lower rates is growing, and most analysts are expecting a cut in rates. All eyes will be on the ECB,  which will announce the new rate on Thursday. Whether the ECB takes action or leaves the rate as is, we could be in for some volatility in the currency markets.

GBP/USD for Wednesday, May 1, 2013

GBP/USD May 1 at 13:30 GMT

1.5566 H: 1.5596 L: 1.5527

GBP/USD Technical

GBP/USD is steady, as it trades in the mid-1.55 range. The pair is testing the 1.5524. We could see this line fall if the pound’s upward momentum continues. There is stronger resistance at 1.5630. On the downside, 1.5524 is providing support. This line could see some activity if the dollar shows any strength. The next support line is 1.5432. On the upside, there is resistance at 1.5630. This is followed by resistance at 1.5695, which is protecting the 1.57 level.

• Current range: 1.5524 to 1.5630

Further levels in both directions:

• Below: 1.5524, 1.5432, 1.5309 and 1.5203
• Above: 1.5630, 1.5695 and 1.5773

OANDA’s Open Positions Ratio

The GBP/USD ratio continues to show movement towards short positions. This is not reflected in the current movement of the pair, as the pound has edged higher. However, the activity in the ratio could be an early indication that we will see the pair move lower.

The pound continues to post gains against the US dollar, as the 1.56 line is in striking distance. We could see further activity after the US FOMC release. As well, the UK releases Construction PMI on Thursday, and this key event should be treated as a market-mover.

GBP/USD Fundamentals

• 6:00 British Nationwide HPI. Estimate 0.3%. Actual -0.1%.
• 8:30 British Manufacturing PMI. Estimate 48.6 points. Actual 49.8 points.
• 12:15 ADP Non-Farm Employment Change. Estimate 154K. Actual 119K.
• 13:00 US Final Manufacturing PMI. Estimate 52.1 points. Actual 52.1 points.
• 14:00 US ISM Manufacturing PMI. Estimate 51.0 points. Actal 50.7 points.
• 14:00 US Construction Spending. Estimate 0.7%. Actual -1.7 points.
• 14:00 US ISM Manufacturing Prices. Estimate 52.6 points. Actual 50.0 points.
• 14:30 US Crude Oil Inventories. Estimate 1.2M. Actual 6.7M.
• All Day: US Total Vehicle Sales. Estimate 15.2 M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.
• 18:00 MPC Member Ben Broadbent Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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