GBP/USD – Pound Dips Lower, US Housing Report Matches Forecast

GBP/USD has lost ground at the start of the new trading week. In Monday’s North American session, the pair is trading just above the 1.25 line. On the release front, it’s a light schedule. In the US, Pending Home Sales rebounded with a strong gain of 1.6%, matching the forecast. Later in the day, the UK releases GfK Consumer Confidence. On Tuesday, the US releases CB Consumer Confidence, with the markets expecting a solid reading of 112.6 points.

Donald Trump has already ruffled the feathers of many world leaders, but he played the part of charming host on Friday, welcoming Prime Minister Theresa May to Washington, the first leader to meet with Trump. The new president said that “Brexit is going to be a wonderful thing”. In the months ahead, however, May will need more than just effusive words from Donald – what she’s really after is a brand new free trade agreement with the US, in order to counter the Brexit critics who are fearful about Britain’s economy once the country leaves the European Union. Given Trump’s protectionist rhetoric and moves early in his presidency, it will be interesting to see what type of a deal May and Trump will reach.

The markets had predicted that US economic growth would soften in the fourth quarter, and Advance GDP fell short of the estimate. The economy expanded 1.9%, shy of the estimate of 2.1%. Business investment and consumer spending remains solid and should continue into 2017. However, Trump’s protectionist rhetoric and actions, which saw tensions escalate with Mexico last week, could darken the bright picture for the US economy.

Donald Trump has barely warmed the president’s chair in the Oval House, but has already signed a host of controversial executive orders which have been condemned both domestically and abroad. Trump has withdrawn from the Trans-Pacific Partnership and declared he will reopen the NAFTA trade agreement with Canada and Mexico. He has also ordered work to begin on a wall with Mexico and banned immigrants from seven Moslem countries. Trump’s unconventional and disjointed approach to international politics and trade could have major ramifications on global trade and could lead to financial instability in global markets, triggering volatility in the currency markets. Just a few days before being sworn in as president, Trump stated that the US dollar was “too strong”, blaming a weak Chinese currency. Predictably, the greenback lost ground after Trump’s remarks. It’s a safe bet that Trump’s offhand tweets and comments will continue to fuel market movement.

Geopolitical and Trade Risks Dominate Market Moves

GBP/USD Fundamentals

Monday (January 30)

• 8:30 US Core PCE Price Index. Estimate 0.1%
• 8:30 US Personal Spending. Estimate 0.4%
• 8:30 US Personal Income. Estimate 0.4%
• 10:00 US Pending Home Sales. Estimate 1.6%
• Tentative – US Loan Officer Survey
• 19:01 British GfK Consumer Confidence. Estimate -8

Upcoming Key Events

Tuesday (January 31)

• 10:00 US CB Consumer Confidence. Estimate 112.6

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, January 30, 2017

GBP/USD January 30 at 10:05 EST

Open: 1.2594 High: 1.2600 Low: 1.2489 Close: 1.2500

GBP/USD Technical

• GBP/USD edged lower in the Asian session and posted further losses in European trade. The pair has ticked lower in the North American session
• 1.2471 is a weak support level
• 1.2579 is the next resistance line

Further levels in both directions:

• Below: 1.2471, 1.2351 and 1.2272
• Above: 1.2579, 1.2674, 1.2775 and 1.2849
• Current range: 1.2471 to 1.2579

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement in the Monday session. Currently, long positions command a majority (56%), indicative of trader bias towards GBP/USD reversing directions and moving upwards.

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.