GBP/USD – Pound Gains After Strong Employment Data

GBP/USD is showing some volatility in Wednesday trading. The pound has posted gains on the day, as it trades just above the 1.67 line in the North American session. In economic news, British Claimant Count Change posted strong numbers and beat the estimate. There were no surprises from the Bank of England, as the Bank’s minutes indicated that the most recent QE and interest rate decisions were both unanimous (9-0). It was a another disappointing day in the US, as Building Permits and the Producer Price Index weakened in January. The minutes of the most recent Federal Reserve policy meeting will be released later in the day.

British Claimant Count Change improved in January, with a decline of -27.6 thousand, easily beating the estimate of -18.3 thousand. However, the unemployment rate edged higher, coming in at 7.2%. The estimate stood at 7.1%. The unexpected rise in unemployment marks the first time since March that the rate has surpassed the estimate. The Bank of England will face increased pressure to raise interest rates if unemployment drops below the 7.0% level, meaning that the unemployment rate will continue to be closely monitored by investors and analysts.

US data continues to disappoint the markets. Building Permits dipped to 0.94 million, its lowest level in five months. The indicator fell short of the estimate of 0.98 million. The Producer Price Index dropped to 0.2%, down from 0.4% a month earlier. Although the index did match the forecast, we continue to see weak inflation numbers, indicative of an underperforming economy. Core CPI will be released on Thursday. Will we some improvement in US inflation levels?

Inflation in the UK was on the market’s mind on Tuesday, with the release of a host of inflation indicators. CPI, one of the most important economic indicators, dipped to 1.9%, the first time it has fallen below the BOE inflation target of 2.0% since November 2009. Other inflation indicators, notably PPI Input and Core CPI, fell short of their estimates, but the pound didn’t show much response to Tuesday’s inflation releases. The BOE has said it expects inflation to remain close to the 2.0% level for the next three years.

GBP/USD for Wednesday, February 19, 2014

GBP/USD February 19 at 16:20 GMT

GBP/USD 1.6712 H: 1.6734 L: 1.6637

GBP/USD Technical

• GBP/USD has moved higher in Wednesday trading, but the pair has had a busy day. The pound dropped sharply in the European session, touching a low of 1.6637. It has since reversed directions and recovered most of these losses.
• On the downside, 1.6705 is again under strong pressure. There is stronger support at 1.6549.
• 1.6896 is the next resistance line. Next, there is resistance at 1.6964, protecting the key 1.70 level.
• Current range: 1.6705 to 1.6896.

Further levels in both directions:

• Below: 1.6705, 1.6549, 1.6416, 1.6329 and 1.6231
• Above: 1.6896, 1.6964, 1.7087 and 1.7192

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Wednesday trading, continuing the trend we saw a day earlier. This is consistent with the pair’s current movement, as the pound has posted gains against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing course and moving to higher ground.

GBP/USD has posted gains in Wednesday trading. In the North American session, the pair is moving higher and has pushed back above the 1.67 line.

GBP/USD Fundamentals

• 9:30 British Claimant Count Change. Estimate -18.3K. Actual -27.6K.
• 9:30 British Unemployment Rate. Estimate 7.1%. Actual 7.2%.
• 9:30 Bank of England MPC Asset Purchase Facility Votes. Exp. 0-0-9. Actual 0-0-9.
• 9:30 Bank of England MPC Official Bank Rate Votes. Exp. 0-0-9. Actual 0-0-9.
• 9:30 Average Earnings Index. Estimate 0.9%. Actual 1.1%.
• 13:30 US Building Permits. Estimate 0.98M. Actual 0.94M.
• 13:30 US PPI. Estimate 0.2%. Actual 0.2%.
• 13:30 US Core PPI. Estimate 0.2%. Actual 0.2%.
• 13:30 US Housing Starts. Estimate 0.95M. Actual 0.88M.
• 19:00 US FOMC Minutes.

*Key releases are highlighted in bold

*All release times are GMT

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.