GBP/USD – Pound Punches Above 1.29 on Carney’s Rate Comments

The British pound has posted considerable gains in the Wednesday session. In North American trade, GBP/USD is up 0.94%, trading at 1.2730. BoE Governor Mark Carney addressed the ECB Forum of Central Bankers, and British Nationwide HPI jumped 1.1%. In the US, Pending Home Sales declined 0.8%, well short of the forecast of +0.9%. On Thursday, the US releases Final GDP and unemployment claims.

The markets continue to keep a close watch on events in Sintra, Portugal. The picturesque city is hosting the ECB Forum, as central bankers have stepped in as market-movers this week. On Tuesday, the euro posted strong gains after ECB President Mario Carney sounded upbeat about the eurozone economy and shrugged off concerns about low inflation. On Wednesday, it was BoE Governor Mark Carney’s turn in the limelight, as his comments have sent the pound higher. Carney said that the BoE would have to consider removing monetary stimulus, and the markets jumped on his comments as a possible sign that he was not adamantly opposed to rate hikes in the near future. BoE policymakers have waged a public debate about rate policy, with Carney stating last week that he was opposed to hikes, only to be contradicted by MPC member Ande Haldane, who said he had been close to voting in favor of a rate hike at the June rate meeting. The vote at the meeting was 5-3 in favor of maintaining rates, surprising the markets, which had predicted a 7-1 vote to keep rates at current levels. Although there are renewed fears that Brexit will take a toll on the British economy, inflation is running close to 3%, well above the BoE’s target of 2 percent. A rate increase would help lower inflation, but Carney, who has voiced concerns about Brexit’s negative ramifications since the vote last June, has been solidly against a rate increase.

Investors are awaiting the Final GDP report out of the US on Thursday, and a weaker reading than expected could have a chilling effect on the US dollar. Preliminary GDP, which was released in May, came in at 1.2%, and this is the estimate for the upcoming GDP report. Recent economic data has been softer than expected, notably construction and manufacturing reports. US durable goods releases were weak in May. Core Durable Goods broke a streak of two straight declines, but the weak gain of 0.1% missed expectations. Durable Goods declined 1.1%, its sharpest decline since June 2016. The slowdown in orders of business equipment could weigh on second quarter growth. Construction numbers have been mixed, and Pending Home Sales disappointed on Wednesday, posting a third straight decline in the May report.

GBP/USD Fundamentals

Wednesday (June 28)

• 2:00 British Nationwide HPI. Estimate 0.1%. Actual 1.1%
• 8:30 US Goods Trade Balance. Estimate -66.2B. Actual -65.9B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.2%. Actual 0.3%
• 9:30 BoE Governor Mark Carney Speaks
• 10:00 US Pending Home Sales. Estimate 0.9%. Actual -0.8%
• 10:30 US Crude Oil Inventories. Estimate -2.1M. Actual +0.1M

Thursday (June 29)

• 8:30 US Final GDP. Estimate 1.2%
• 8:30 US Unemployment Claims. Estimate 241K

*All release times are EDT

*Key events are in bold

GBP/USD for Wednesday, June 28, 2017

GBP/USD June 28 at 11:55 EDT

Open: 1.2813 High: 1.2972 Low: 1.2793 Close: 1.2936

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair showed limited movement in European trade and has posted strong gains in the North American session
• 1.2706 is providing support
• 1.2865 is the next line of resistance

Further levels in both directions:

• Below: 1,.2706, 1.2571, 1.2401 and 1.2313
• Above: 1.2865, 1.2946 and 1.3058 and
• Current range: 1.2706 to 1.2865

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Wednesday session. Currently, short positions have a majority (60%), 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.