GBP/USD – Pound Falls to 3-months Low on Mixed UK Data

The British pound has posted strong losses in the Wednesday session. In North American trade, GBP/USD is trading at 1.2067. On the release front, there are a host of UK events. Manufacturing Production posted a sharp gain of 1.3%, well above the forecast of 0.6%. However, the UK Goods Trade deficit widened to GBP 12.2 billion, larger than the estimate of GBP 11.2 billion. As well, BoE Governor Mark Carney testified at Parliament’s Treasury Select Committee. In the US, Crude Oil Inventories posted a large surplus of 4.1 million, much larger than the estimate of 0.9 million. On Thursday, the US releases unemployment claims, with the indicator expected to rise to 266 thousand. 

President-elect Donald Trump is hosting a press conference on Wednesday. Trump hasn’t spoken formally with the press in six months, choosing instead to send pithy and often controversial comments on his Twitter account. The president-elect had plenty to say about the ills of the US economy on the campaign trail, but was short on specifics. He has gone on record promising tax cuts and significant fiscal spending to repair the country’s infrastructure. Trump has said he will implement protectionist policies, which has lessened investors’ appetite for risk. The markets will be hoping for more specifics about economic policy, with just over a week until Inauguration Day. The US dollar has climbed sharply since mid-November, as the US economy sails full steam ahead in 2017.

There were plenty of events in the UK for the markets to digest on Wednesday. Key indicators were a mixed bag. Manufacturing Production posted a gain 1.3%, its strongest gain since April. The markets chose, however, to focus on the Goods Trade deficit, which jumped to GBP 12.2 billion. The pound responded negatively and dropped below the 1.21 line for the first time since October 6. Meanwhile, Mark Carney testified before a parliamentary committee. Carney acknowledged that the British financial sector will face adverse consequences due to Brexit, but argued that the “financial stability risks around that process are greater on the continent than they are for the UK”.

GBP/USD Fundamentals

Wednesday (January 11)

• 4:30 British Manufacturing Production. Estimate 0.6%. Actual 1.3%
• 4:30 British Goods Trade Balance. Estimate -11.2B Actual -12.2B
• 4:30 British Construction Output. Estimate +0.3%. Actual -0.2%
• 4:30 British Industrial Production. Estimate 0.8%. Actual 2.1%
• 9:15 BoE Governor Mark Carney Speech
• 9:39 British NIESR GDP Estimate. Actual 0.5%
• 10:30 US Crude Oil Inventories. Estimate 0.9M. Actual 4.1M
• 11:00 President-Elect Donald Trump Speech
• 13:01 US 10-year Bond Auction
• 13:20 US FOMC Member William Dudley Speech

Thursday (January 12)

• 8:30 US Unemployment Claims. Estimate 266K

*All release times are EST

* Key events are in bold

GBP/USD for Wednesday, January 11, 2017

GBP/USD January 11 at 11:40 EST

Open: 1.2173 High: 1.2198 Low: 1.2033 Close: 1.2120

GBP/USD Technical

• GBP/USD was flat in the Asian session and posted slight gains in European trade. The pair has been choppy in the North American session
• 1.2111 is providing weak support
• 1.2272 is the next resistance line

Further levels in both directions:

• Below: 1.2111, 1.1943, 1.1844 and 1.1559
• Above: 1.2272, 1.2351 and 1.2471
• Current range: 1.2111 to 1.2272

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged this week. In the Wednesday session, long positions have a strong majority (68%). This is 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.