GBP/USD – Pound Slides Continues on Soft Services PMI

GBP/USD has posted losses in Friday trade. Currently GBP/USD is trading at 1.2220. On the release front, British Services PMI dipped to 53.3, short of the estimate of 54.4 points. In the US, today’s highlight is ISM Manufacturing PMI, which is forecast to remain unchanged at 56.5 points. The markets will be listening closely as four FOMC members deliver remarks on Friday, including Federal Reserve Chair Janet Yellen.

Market sentiment continues to heat up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move on March 15, when the Fed next meets for a policy meeting. Earlier in the week, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for “serious consideration” at the March policy meeting. The markets are taking these statements at face value, as the odds of a March move have increased dramatically. The likelihood of a rate move has soared to 80%, compared to 33% just a few days ago. Why the huge jump in odds? One reason is that policymakers are now saying they don’t need to wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

The pound’s troubles continue, as the currency has fallen 1.4 percent this week. Earlier on Friday, GBP/USD dropped to a low of 1.2214, marking its lowest level since January 17. The pound has responded negatively to this week’s key PMI reports. Manufacturing and Services PMIs both missed expectations, and Construction PMI continues to point to weak expansion. The softer Services PMI reflects more cautious spending by British consumers, who remain concerned about the ramifications of Brexit on the economy and their pocketbooks.

GBP/USD Fundamentals

Friday (March 3)

• 4:30 British Services PMI. Estimate 54.2. Actual 53.3
• 10:00 US ISM Manufacturing PMI. Estimate 56.5
• 10:15 US FOMC Member Charles Evans Speech
• 12:15 US FOMC Jerome Powell Speech
• 13:00 Federal Reserve Chair Janet Yellen Speech
• 13:00 US FOMC Member Stanley Fischer  Speaks

*All release times are GMT

*Key events are in bold

GBP/USD for Friday, March 3, 2017

GBP/USD March 3 at 6:50 EST

Open: 1.2272 High: 1.2283 Low: 1.2214 Close: 1.2223

GBP/USD Technical

• GBP/USD was flat in the Friday session and has posted losses in European trade
• 1.2143 is providing support
• 1.2272 was tested in resistance earlier

Further levels in both directions:

• Below: 1.2143, 1.2033 and 1.1943
• Above: 1.2272, 1.2351, 1.2471 and 1.2579
• Current range: 1.2143 to 1.2272

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Friday session. Currently, long positions have a majority (66%), indicative of trader bias towards GBP/USD reversing directions and moving upwards.

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.