GBP/USD – Pound Breaks Out of Christmas Doldrums, Hits 2-Week High

The British pound continues to have a quiet week and is showing little movement in the Thursday session. In North American trade, GBP/USD is trading at 1.3444, up 0.34% on the day. Earlier in the day, the pair climbed to its highest level since December 14. On the release front, the sole British event was  High Street Lending ,which slipped below the 40-thousand threshold for the first time since September 2016. The indicator dipped to 39.5 thousand in November, shy of the estimate of 40.6 thousand. In the US, unemployment claims disappointed, remaining unchanged at 245 thousand. This was higher than the estimate of 240 thousand.

In the U.S, the first key indicators of the holiday week were mixed. CB Consumer Confidence slowed to 122.2, well off the estimate of 128.2 points. Pending Home Sales posted a small gain of 0.2%, beating the estimate of -0.4%. Housing numbers continue to beat expectations. Last week, Housing Starts came in at 1.30 million, beating the forecast of 1.25 million. On Tuesday, New Home Sales sparkled, with a gain of 733 thousand. This easily beat the estimate of 654 thousand, and was the highest reading since September 2007. On Thursday, the US releases unemployment claims, which is expected to drop to 241 thousand.

With no major British indicators during Christmas week, the pound has shown limited movement. That could change next week, with the release of PMI reports, which are highly-respected barometers of the services, manufacturing and construction sectors. The PMIs have been pointing to expansion in all three industries, with notably strong growth in manufacturing, which has received a boost for strong global demand for British exports. As well, the weak pound has also made British products less expensive.

High on Prime Minister Theresa May’s New Years’ agenda is Brexit. The talks are finally shifting to trade, much to the relief of May, who has faced harsh criticism at home over her handling of the talks with the Europeans. May has her work cut out for her, with little more than a year until Britain leaves the European Union. Her cabinet remains split on what a Brexit deal will look like, and the Europeans are in no mood to do Britain any favors, in order not to give other EU members any ideas about jumping ship. What will a trade relationship between Britain and the European Union look like? That remains unclear, but it’s no secret that the two sides remain far apart on the “end phase” of what a Brexit agreement will look like, and both Britain and the EU will have to show some flexibility in order to hammer out an agreement. Given the lack of trust between the parties, there will be more bumps on the Brexit road, which could weigh on the British pound in the coming months.

GBP/USD Fundamentals

Thursday (December 28)

• 4:30 British High Street Lending. Estimate 40.6K. Actual 39.5K
• 8:30 US Unemployment Claims. Estimate 240K. Actual 245K
• 8:30 US Goods Trade Balance. Estimate -67.7B. Actual -69.7B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%. Actual 0.7%
• 9:45 US Chicago PMI. Estimate 62.2. Actual 67.6
• 10:30 US Natural Gas Storage. Estimate -115B. Actual -112B
• 11:00 US Crude Oil Inventories. Estimate -3.9M. Actual -4.6M

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, December 28, 2017

GBP/USD December 28 at 11:45 EDT

Open: 1.3399 High: 1.3456 Low: 1.3395 Close: 1.3444

GBP/USD Technical

GBP/USD posted gains in the Asian session. The pair recorded slight gains in the European session but then retracted. GBP/USD is steady in North American trade

• 1.3402 has switched to a support role following gains by GBP/USD on Thursday
• 1.3503 is the next resistance line

Current range: 1.3402 to 1.3503

Further levels in both directions:

• Below: 1.3402, 1.3221, 1.3186 and 1.3035
• Above: 1.3503, 1.3655 and 1.3809

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement in the Thursday session. Currently, short and long positions almost evenly split, indicative of a lack of trader bias as to what direction GBP/USD will take next.

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.