GBP/USD – Pound Can’t Make Up Its Mind After Soft UK Manufacturing PMI

GBP/USD has moved strongly in both directions on Wednesday, but is almost unchanged as the pair trades at the 1.62 line in the North American session. On the release front, British Manufacturing slipped to 51.6 points last month, short of expectations. Over in the US, ADP Nonfarm Payrolls rose 213 thousand, which was above expectations. However, ISM Manufacturing PMI dropped to 51.6 points.

The pound shrugged off a weak Manufacturing PMI on Wednesday. The index dropped to 56.6 points, down from the previous reading of 52.5 points. This was the PMI’s lowest level since May 2013 and marked a third straight decline. The markets are bound to be concerned about the health of the manufacturing sector after the disappointing reading and will be closely monitoring upcoming manufacturing data. There was much better news from Final GDP earlier in the week. The quarterly indicator posted a sharp gain of 0.9% in Q2, its best showing since Q3 of 2012.

In the US, ADP Nonfarm Payrolls surprised with a strong gain, climbing to 213 thousand, compared to 204 thousand in the previous release. This beat the estimate of 207 thousand. The ADP release precedes the official NFP release, which will be published on Friday. The markets are anticipating a sharp gain, with an estimate of 216 thousand. If the indicator does follow suit with a solid reading, the US dollar could post further gains against its major rivals. The news was not as cheery on the manufacturing front, as ISM Manufacturing PMI fell to 56.6 points, down from 59.0 points a month earlier.

Earlier in the week, US Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. The important housing indicator has shown strong movement, resulting in readings that have been well off market estimates. US housing indicators continue to paint a mixed picture, as New Home Sales jumped last month, while Existing Home Sales softened and was well short of expectations.

GBP/USD for Wednesday, October 1, 2014

GBP/USD October 1 at 15:40 GMT

GBP/USD 1.6205 H: 1.6252 L: 1.6162

GBP/USD Technical

• GBP/USD has had an active day. The pair edged lower in the Asian session but then recovered. In the European session, GBP/USD dropped to a low of 1.6162, putting pressure on support at 1.6141 for a second straight day. The pound then reversed directions and moved higher. This movement continued in the North American session, as the pound climbed close to resistance at 1.6263. The pair has since retracted.
• 1.6141 continues to provide support.
• 1.6263 is the next resistance line.
• Current range: 1.6141 to 1.6263.

Further levels in both directions:

• Below: 1.6141, 1.6000, 1.5864 and 1.5717
• Above: 1.6263, 1.6382, 1.6484, 1.6605 and 1.6755

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged on Wednesday. This is consistent with the pair’s movement, as the pound has shown little net movement despite some volatility. The pair is almost evenly split between long and short positions, indicative of a lack of trader bias as to what direction we can next expect the pair to take.

GBP/USD Fundamentals

• 8:30 British Manufacturing PMI. Estimate 52.6 points. Actual 51.6 points.
• 12:15 US ADP Nonfarm Employment Change. Estimate 207K. Actual 213K.
• 13:45 US Final Manufacturing PMI. Estimate 58.0 points. Actual 57.5 points.
• 14:00 US ISM Manufacturing PMI. Estimate 58.6 points. Actual 56.6 points.
• 14:00 US Construction Spending. Estimate 0.5%. Actual -0.8%.
• 14:00 US ISM Manufacturing Prices. Estimate 56.8 points. Actual 59.5 points.
• 14:30 US Crude Oil Inventories. Estimate 0.6M. Actual -1.4M.
• All Day – US Total Vehicle Sales. Estimate 16.9M.
• 17:30 External BOE MPC Member Kristin Forbes Speaks.

* Key releases are highlighted in bold

*All release times are GMT

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