GBP/USD – Pound Higher Despite Lower UK Growth Forecast

The British pound has posted gains in the Wednesday session. In North American trade, GBP/USD is trading at 1.3283, up 0.35% on the day. On the release front, the UK presented the Autumn Budget. In the US, durable goods reports were a mix. Core Durable Goods Orders gained 0.4%, matching the forecast. However, Durable Goods Orders declined 1.4%, well off the forecast of a 0.4% gain. The UoM Consumer Sentiment report came in at 98.5, above the forecast of 98.2 points. Later in the day, the Federal Reserve releases the minutes of its November policy meeting.

British Finance Minister Philip Hammond released the August Budget, which was noteworthy for a large contingency fund for Brexit. Hammond announced he was setting aside GBP 3 billion pounds over the next two years, beefing up the contingency fund of GBP 700 million. Meanwhile, the Office for Budget Responsibility (OBR) downgraded Britain’s GDP for 2017, from 2% to 1.5%. The OBR also revised downwards productivity growth and business investment, further signs that the economy could be headed for a down-spin.

There was positive news from British CBI Industrial Order Expectations on Monday, an important barometer of activity in the manufacturing sector. The indicator surged to 17 points in October, rebounding from the September release of -2 points. Manufacturing indicators continue to point upwards, boosted by strong global demand and a weak British pound. Export order books are at their highest levels since 1995, and the markets are predicting that the export and manufacturing sectors will continue to shine in the fourth quarter.

The markets are keeping an eye on the Federal Reserve, which will release the November minutes later in the day. In October, the Fed announced that it would taper its balance sheet, and those reductions of $10 billion commenced around the time of the November meeting. The likelihood of upcoming rate hikes remains very high, with the odds for December and January hikes priced in at 91% and 89%, respectively. If the minutes reinforce the market perception that further rate hikes are just around the corner, the US dollar could gain ground.

GBP/USD Fundamentals

Wednesday (November 22)

• 7:30 British Autumn Forecast Statement
• 8:30 US Core Durable Goods Orders. Estimate 0.4%. Actual 0.4%
• 8:30 US Unemployment Claims. Estimate 241K. Actual 239K
• 8:30 US Durable Goods Orders. Estimate 0.4%. Actual -1.2%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 98.2. Actual 98.5
• 10:00 US Revised UoM Inflation Expectations. Actual 2.5%
• 10:30 US Crude Oil Inventories. Estimate -1.4M. Actual -1.9M
• 12:00 US Natural Gas Storage. Estimate -51B
• 14:00 US FOMC Meeting Minutes

Thursday (November 23)

• 4:30 British Second Estimate GDP. Estimate 0.4%
• 4:30 British Preliminary Business Investment. Estimate 0.3%

*All release times are GMT

*Key events are in bold

GBP/USD for Wednesday, November 22, 2017

GBP/USD November 22 at 11:20 EDT

Open: 1.3214 High: 1.3287 Low: 1.3186 Close: 1.3286

GBP/USD Technical

GBP/USD inched higher in the Asian session. The pair edged higher in European trade but then retracted. GBP/USD has edged lower in North American trade

• 1.3186 is providing support
• 1.3321 is the next resistance line

Further levels in both directions:

• Below: 1.3186, 1.3048 and 1.2930
• Above: 1.3321, 1.3402 and 1.3503
• Current range: 1.3186 to 1.3321

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Wednesday session. Currently, there is an almost even split between long and short positions. This is indicative of a lack of trader bias as to what direction GBP/USD will take next.

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.