GBP/USD – Pound Dips on Mixed Job Numbers, CPI Next

The British pound has posted losses on Tuesday, after starting the week with strong gains. In North American trade, GBP/USD is trading at 1.4291, down 0.32% on the day. On the release front, British employment indicators were mixed. Wage growth remained unchanged at 2.8%, shy of the estimate of 3.0%. Unemployment claims rose to 11.6 thousand, but this beat expectations, as the forecast stood at 13.3 thousand. This was the largest number of claims in 11 months. As well, the unemployment rate dipped to an impressive 4.2%, edging below the estimate of 4.3%. In the US, the focus was on construction data. Building Permits improved to 1.35 million, beating the forecast of 1.33 million. Housing Starts climbed to 1.32 million, above the estimate of 1.27 million. On Wednesday, the UK releases a host of inflation indicators, led by CPI.

After posting gains for seven straight sessions, the pound has lost ground on Tuesday. The currency has looked sharp against the greenback, gaining 5.8% so far in 2018.  Earlier on Tuesday, GBP touched 1.4377, its highest level since June 2016. A stronger currency has helped ease inflation concerns to a degree, although the inflation rate is still closer to 3%, well above the BoE target of 2%.Will the BoE raise interest rates at the May policy meeting? One strong reason in favor of a rate hike is that inflation remains around 3%, well above the 2% target. However, the lukewarm British economy and the dark cloud of Brexit are key reasons why Governor Mark Carney has not been enthusiastic about raising rates. If inflation levels remain high and the economy does not lose steam, traders can expect the BoE to press the rate trigger next month.

Syria remains a geopolitical hotspot after Britain joined the US and France in a surgical missile strike-led missile against Syrian weapons sites on the weekend. Predictably, Syria and Russia strongly condemned the attack, with Russian President Putin warning that the attack would lead to global “chaos”. Still, a Russian response is unlikely, despite the strong rhetoric. Investors did not show much reaction to the attack, as the markets had already priced in a strike. After the weekend attack, President Trump declaration of “mission accomplished” means that things will remain relatively quiet in Syria. However, further chemical attacks by the Syrian regime could trigger a response from the US and its allies, which could result in volatility in the markets, similar to what occurred last week.

GBP/USD Fundamentals

 Tuesday (April 17)

• 4:30 British Average Earnings Index.  Estimate 3.0%. Actual 2.8%
• 4:30 British Claimant Count Change. Estimate 13.3K. Actual 11.6K
• 4:30 British Unemployment Rate. Estimate 4.3%. Actual 4.2%
• 8:30 US Building Permits. Estimate 1.33M. Actual 1.35M
• 8:30 US Housing Starts. Estimate 1.27M. Actual 1.32M
• 9:15 US Capacity Utilization Rate. Estimate 77.9%. Actual 78.0%
• 9:15 US FOMC Member John Williams Speaks
• 9:15 US Industrial Production. Estimate 0.3%. Actual 0.5%
• 10:00 US FOMC Member Randal Quarles Speaks
• 17:40 US FOMC Rafael Bostic Speaks

 Wednesday (April 18)

• 4:30 British CPI. Estimate 2.7%

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, April 17, 2018

GBP/USD April 17 at 12:25 EDT

Open: 1.4339 High: 1.4377 Low: 1.4285 Close: 1.4292

GBP/USD Technical

GBP/USD was flat in the Asian session. The pair edged higher but then retracted in European trade. GBP/USD continues to lose ground in the North American session

• 1.4227 is providing support
• 1.4345 is the next resistance line
• Current range: 1.4227 to 1.4345

Further levels in both directions:

• Below: 1.4227, 1.4128, 1.4010, 1.3901
• Above: 1.4345, 1.4452 and 1.4565

OANDA’s Open Positions Ratio

GBP/USD ratio is showing negligible movement in the Tuesday session. Currently, short positions have a majority (62%), indicative of trader bias towards GBP/USD continuing to move lower.

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.