GBP/USD – Little Movement Ahead of US Key Numbers

The British pound is almost unchanged in Friday trading, as the pair trades at the 1.68 line in European session. On the release front, today’s highlights out of the US are Building Permits and the Preliminary UoM Consumer Sentiment. There are no British releases on Friday.

Low inflation levels have been a persistent problem in the US, and Fed chair Yellen highlighted this issue when speaking before Congress last week. Inflation is nowhere near the Fed’s target of 2.0%, and weak inflation is a sign of an underperforming US economy. Core CPI posted a weak gain of 0.2% in April, edging above the estimate of 0.1%. Earlier in the week, Core PPI posted a gain of 0.5%, beating the estimate of 0.2%.

Although inflation numbers have not impressed, employment and manufacturing numbers looked sharp on Thursday. Unemployment Claims were outstanding, dropping to 297 thousand last week. This easily beat the estimate of 321 thousand and was the lowest level we’ve seen since May 2007.  On the manufacturing front, the Philly Fed Manufacturing Index dipped to 15.4 points, but this was well above the estimate of 13.9 points. As well, Empire State Manufacturing Index climbed to 19.0 points, crushing the estimate of 5.5. This was the indicator’s best showing in two years.

The Bank of England released its quarterly inflation report on Wednesday. The markets were disappointed with the dovish tone of the report, which reiterated that with slack still present in the UK economy, the Bank has no plans to raise interest rates before 2015. Governor Mark Carney has spent a lot of effort trying to dampen market expectations about a rate hike, and he’ll likely have to continue doing so if the British economy continues to produce strong numbers and unemployment drops further.

British Claimant Change, one of the most important indicators, was respectable in April, but the markets were looking for more. The key indicator came in at -25.1 thousand, missing the estimate of -30.7 thousand. The unemployment rate remained pegged at 6.8%, matching the forecast. With speculation swirling about when the BOE might raise rates, every employment release will be under the market microscope.

GBP/USD for Friday, May 16, 2014

GBP/USD May 16 at 11:25 GMT

GBP/USD 1.6806 H: 1.6812 L: 1.6783

GBP/USD Technical

• GBP/USD is steady on Friday, trading close to the 1.68 line.
• On the upside, 1.6896 continues to provide strong resistance.
• 1.6765 is a weak support line. It could be tested if the pound loses ground. The next support level is at 1.6705.

Further levels in both directions:

• Below: 1.6765, 1.6705, 1.6549 and 1.6436
• Above: 1.6896, 1.70, 1.7210, 1.7374 and 1.7538

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Friday trading, continuing the trend seen a day earlier. This is consistent with the movement of the pair, as the pound has posted small gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving higher against the pound.

GBP/USD continues to hug the 1.68 line in Friday trade. The pair is almost unchanged in the European session.

GBP/USD Fundamentals

• 12:30 US Building Permits. Estimate 1.01M.
• 12:30 US Housing Starts. Estimate 0.98M.
• 13.55 US Preliminary UoM Consumer Sentiment. Estimate 84.7 points.
• 13:55 US Preliminary UoM Consumer Expectations.

*Key releases are highlighted in bold

*All release times are GMT

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.