GBP/USD – Pound Jumps to 11-Week High

The British pound has started the week with strong gains, as last week’s rally has continued in the Monday session. In North American trade, GBP/USD is trading at 1.4329, up 0.65% on the day. On the release front, the British CB Leading Index declined 0.4%. In the US, Core Retail Sales remained unchanged at 0.2%, matching the forecast. Retail Sales impressed with a gain of 0.6%, above the estimate of 0.4%. This followed two straight declines. On Tuesday, the UK releases wage growth and unemployment claims and the US publishes Building Permits.

After a week of uncertainty, which roiled the markets, US President Trump made good on his word as a US-led strike destroyed several chemical installations in Syria on Saturday. Predictably, Syria and Russia strongly condemned the attack, but are unlikely to retaliate despite the rhetoric. The markets had already priced in an attack, and are hopeful that Trump’s 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.

It continues to be blue skies for the British pound, which continues to gain ground against the US dollar. GBP/USD has surged an impressive 5.4% since the start of the year and is at its highest level since late January. A stronger currency has helped ease inflation concerns to a degree, although the inflation rate is still close to 3%, well above the BoE target of 2%. As for rate policy, bank policymakers do not meet for a rate meeting until May, but there appears to be strong support for a quarter-point rate increase. Last week, a key BoE member, Ian McCafferty, urged the bank not to delay in raising rates, and other policymakers support this view. 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. As things currently stand, a quarter-point rate hike seems likely at the May meeting.

This Week’s UK Data Key Ahead of BoE Next Month

GBP/USD Fundamentals

 Sunday (April 15)

• 19:01 British Rightmove HPI. Actual 0.4%

Monday (April 16)

• 8:30 US Core Retail Sales. Estimate 0.2%. Actual 0.2%
• 8:30 US Retail Sales. Estimate 0.4%. Actual 0.6%
• 8:30 US Empire State Manufacturing Index. Estimate 19.8. Actual 15.8
• 9:30 British CB Leading Index. Actual -0.4%
• 10:00 US Business Inventories. Estimate 0.6%. Actual 0.6%
• 10:00 US NAHB Housing Market Index. Estimate 71. Actual 69
• 13:15 US FOMC Member Raphael Bostic Speaks
• 16:00 US TIC Long-Term Purchases

 Tuesday (April 17)

• 4:30 British Average Earnings Index.  Estimate 3.0%
• 4:30 British Claimant Count Change. Estimate 13.3K
• 4:30 British Unemployment Rate. Estimate 4.3%
• 8:30 US Building Permits. Estimate 1.33M
• 8:30 US Housing Starts. Estimate 1.27M

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, April 16, 2018

GBP/USD April 16 at 12:45 EDT

Open: 1.4236 High: 1.4339 Low: 1.4230 Close: 1.4329

GBP/USD Technical

GBP/USD edged higher in the Asian session. The pair posted stronger gains in European trade and is flat in the North American session

• 1.4227 has switched to a support role following gains by GBP/USD on Monday
• 1.4345 is a weak 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 continues to show gains in short positions. Currently, short positions have a majority (61%), indicative of trader bias towards GBP/USD reversing directions and moving 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.