GBP/USD – Pound Dips to 1-Week Low as US Jobless Claims Sparkle

The British pound has lost ground for a third straight day. In Thursday’s North American session, GBP/USD is trading at 1.4032, down 0.31% on the day. On the release front, Britain’s current account deficit narrowed to GBP 18.4 billion in the fourth quarter. British Final GDP remained unchanged at 0.4% in Q4. In the US, unemployment claims impressed, dropping to 215 thousand. This easily beat the estimate of 230 thousand. Consumer confidence also improved, as UoM Consumer Sentiment rose to 101.4, breaking past the 100-barrier for the first time since October. However, the indicator missed the estimate of 101.9 points.

Britain and the European Union recently agreed to a transition phase in the Brexit process, which is meant to cushion Britain’s departure from the club. In particular, the business sector will have to adapt to the new reality of post-Brexit. The British economy has performed better than most had expected, with the uncertainty over Britain’s departure from the European Union in March 2019. However, indicators released on Wednesday pointed to some glaring weaknesses in the British economy. The CBI Retail Sales survey has showed sales volumes softening in recent months, and this troubling trend continued in March, with a reading of -8 points. Consumer confidence is also waning, as GfK Consumer Confidence has posted consecutive declines since April 2016. Still, the British pound has enjoyed a solid March, with gains of 2.6% against the US dollar.

The US economy continues to expand at a brisk clip. Revised GDP for the third quarter came in at 2.9%, beating the estimate of 2.7%. This reading was revised upwards from the initial GDP estimate of 2.5%. Although fourth quarter growth was solid, it could not keep up with a superb third quarter, which posted a gain of 3.2%. As for 2018, first quarter growth is expected to soften to 1.8%, but there is still a strong chance that the economy could hit 3% growth this year, as promised by US President Trump. The catalysts for such a rosy prediction are the massive tax cut and higher government spending. Where does this leave the Federal Reserve, which raised interest rates last week? Currently, the Fed is projecting to more rate hikes this year, but if the economy remains strong and inflation levels move closer to the Fed target of 2%, we could see four rate increases in 2018.

GBP/USD Fundamentals

 Thursday (March 29)

• 2:00 British Nationwide HPI. Estimate +0.2%. Actual -0.2%
• 4:30 British Current Account. Estimate -24.0B. Actual -18.4B
• 4:30 British Final GDP. Estimate 0.4%. Actual 0.4%
• 4:30 British Net Lending to Individuals. Estimate 4.8B. Actual 5.4B
• 4:30 British Index of Services. Estimate 0.6%. Actual 0.6%
• 4:30 British M4 Money Supply. Estimate +1.3%. Actual -0.3%
• 4:30 British Mortgage Approvals. Estimate 66K. Actual 64K
• 4:30 British Revised Business Investment. Estimate 0.0%. Actual 0.3%
• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.2%. Actual 0.2%
• 8:30 US Unemployment Claims. Estimate 230K. Actual 215K
• 8:30 US Personal Income. Estimate 0.4%. Actual 0.4%
• 9:45 US Chicago PMI. Estimate 62.1. Actual 57.4
• 10:00 US Revised UoM Consumer Sentiment. Estimate 101.9. Actual 101.4
• 10:00 US Revised UoM Inflation Expectations. Actual 2.8%
• 10:30 US Natural Gas Storage. Estimate -75B. Actual -63B

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, March 29, 2018

GBP/USD March 29 at 12:00 EDT

Open: 1.4076 High: 1.4097 Low: 1.4018 Close: 1.4032

GBP/USD Technical

GBP/USD posted gains in the Asian session but retracted these gains in European trade. The pair continues to head lower in the North American session

• 1.4010 is providing weak support
• 1.4128 is the next resistance line
• Current range: 1.4010 to 1.4128

Further levels in both directions:

• Below: 1.4010, 1.3901 and 1.3793
• Above: 1.4128, 1.4227, 1.4345 and 1.4452

OANDA’s Open Positions Ratio

GBP/USD ratio is showing slight gains in long positions. Currently, short positions have a majority (54%), indicative of trader bias towards GBP/USD continuing to move downwards.

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.