GBP/USD – Pound Holds Firm As US Data Shines

The British pound has stabilized on Thursday, after sustaining losses against the dollar throughout the week. In the North American session, GBP/USD is trading just shy of the 1.68 line. In the US, it was a very busy day. Unemployment Claims and the Philly Fed Manufacturing Index were strong, while Core CPI posted a weak gain. In the UK, today’s sole release is CB Leading Index showed little change in April.

In the US, Thursday’s employment and manufacturing numbers were strong. Unemployment Claims was outstanding, dropping to 297 thousand last week. This easily beat the estimate of 321 thousand and was the lowest level we’ve seen since May 2007.  On the manufacturing front, the Philly Fed Manufacturing Index dipped to 15.4 points, but this was well above the estimate of 13.9 points. As well, Empire State Manufacturing Index climbed to 19.0 points, crushing the estimate of 5.5. This was the indicator’s best showing in two years.

The Bank of England released its quarterly inflation report on Wednesday. The markets were disappointed with the dovish tone of the report, which reiterated that with slack still present in the UK economy, the Bank has no plans to raise interest rates before 2015. Governor Mark Carney has spent a lot of effort trying to dampen market expectations about a rate hike, and he’ll likely have to continue doing so if the British economy continues to produce strong numbers and unemployment drops further.

British Claimant Change, one of the most important indicators, was respectable in April, but the markets were looking for more. The key indicator came in at -25.1 thousand, missing the estimate of -30.7 thousand. The unemployment rate remained pegged at 6.8%, matching the forecast. With speculation swirling about when the BOE might raise rates, every employment release will be under the market microscope.

Low inflation levels have been a persistent problem in the US, and Fed chair Yellen highlighted this issue when speaking before Congress last week. Inflation levels are nowhere near the Fed’s target of 2.0%, and weak inflation is a sign of an underperforming US economy. There was good news on Wednesday as PPI, a key inflation indicator, edged higher in April, coming in at 0.6%. This easily beat the estimate of 0.2%. Core PPI also beat the estimate, posting a gain of 0.5%.

GBP/USD for Thursday, May 15, 2014

GBP/USD May 15 at 15:50 GMT

GBP/USD 1.6791 H: 1.6806 L: 1.6733

GBP/USD Technical

• GBP/USD has rebounded on Thursday . The pair is testing the 1.68 line in the North American session.
• On the upside, 1.6896 continues to provide strong resistance.
• 1.6765 is providing weak support and was breached earlier in the day. The next support level is at 1.6705.

Further levels in both directions:

• Below: 1.6765, 1.6705, 1.6549 and 1.6436
• Above: 1.6896, 1.70, 1.7210, 1.7374 and 1.7538

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Thursday trading, continuing the trend seen a day earlier. This is consistent with the movement of the pair, as the pound has posted modest gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving higher against the pound.

GBP/USD has posted modest gains on Thursday. The dollar is under pressure in the North American session.

GBP/USD Fundamentals

• 9:00 British CB Leading Index. Actual 0.3%.
• 12:30 US Core CPI. Estimate 0.1%. Actual 0.2%.
• 12:30 US Unemployment Claims. Estimate 321K. Actual 297K.
• 12:30 US CPI. Estimate 0.3%. Actual 0.3%.
• 12:30 US Empire State Manufacturing Index. Estimate 5.5 points. Actual 19 points.
• 13:00 US TIC Long-Term Purchases. Estimate 32.3B. Actual 4.0B.
• 13:15 US Capacity Utilization Rate. Estimate 79.2%. Actual 78.6%.
• 13:15 US Industrial Production. Estimate 0.4%. Actual -0.6%.
• 14:00 US Philly Fed Manufacturing Index. Estimate 13.9 points. Actual 15.4 points.
• 14:00 US Mortgage Delinquencies. Actual 6.11%.
• 14:00 US NAHB Housing Market Index. Estimate 49 points. Actual 45. points.
• 14:30 US Natural Gas Storage. Estimate 99B. Actual 105B.
• 16:30 BOC Deputy Governor Lawrence Schembri Speaks.
• 23:00 US Federal Reserve Chair Janet Yellen Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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