GBP/USD – Pound Slides As Services PMI Falters

The GBP/USD lost ground on Thursday, as the pair dropped below the 1.66 level. In economic news, UK Services PMI fell short of the estimate. In the US, Trade Balance worsened and missed the estimate. Unemployment Claims also missed the forecast, while ISM Non-Manufacturing PMI improved in March.

British PMIs are an important gauge of the health and direction of the UK economy. It was a clean sweep for this week’s PMIs, but not in a positive sense. All three key indicators fell short of their estimates in March, which is bound to raise concern about the economy. On Thursday, Services PMI dropped for a fifth straight month, coming in at 57.6 points. This was short of the estimate of 58.2 points. The good news is that the PMIs continue to point to expansion, as all three remain well above the 50-point level. Still, if key British indicators continue to miss expectations, the pound could hit more turbulence.

US Unemployment Claims disappointed, as the key indicator jumped to 326 thousand last week, up from 311 thousand in the previous release. This missed the estimate of 319 thousand. Earlier in the week, ADP Nonfarm Payrolls jumped to 191 thousand, up from 139 thousand a month earlier. This practically matched the estimate of 192 thousand. We’ll get a look at the Unemployment Rate and NFP, one of the most important economic indicators, on Friday.

Earlier in the week, Fed chair Janet Yellen said that inflation and employment levels needed to improve considerably, and the Federal Reserve would continue to provide monetary stimulus for some time. Currently, the Fed is purchasing $55 billion in assets under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence. At the same time, the Federal Reserve has stated that it has no plans to raise interest rates until sometime in 2015.

GBP/USD for Thursday, April 3, 2014

GBP/USD April 3 at 15:40 GMT

GBP/USD 1.6581 H: 1.6661 L: 1.6570

GBP/USD Technical

• GBP/USD has posted losses on Thursday. The pair weakened early in the European session and dropped below the 1.66 line.
• On the downside, 1.6549 is providing support. This line has weakened as the pound has dropped.
• 1.6705 is a strong resistance line.

Further levels in both directions:

• Below: 1.6549, 1.6416, 1.6329, 1.6236 and 1.6146
• Above: 1.6705, 1.6765, 1.6896 and 1.6964

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Thursday. This is consistent with what we are seeing from the pair, as the pound has lost ground. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to make inroads against the pound.

The pound has lost ground on Thursday and is trading in the high-1.65 range. GBP/USD remains under pressure in the North American session.

GBP/USD Fundamentals

• 8:30 British Services PMI. Estimate 63.1 points. Actual 62.5 points.
• 8:30 BOE Credit Conditions Survey.
• 8:30 British Housing Equity Withdrawal. Estimate -9.4B. Actual -10.6B.
• 11:30 US Challenger Job Cuts. Actual -30.2%.
• 12:30 US Trade Balance. Estimate -38.3B. Actual -42.3B.
• 12:30 US Unemployment Claims. Estimate 319K. Actual 326K.
• 13:45 US Final Services PMI. Estimate 55.5 points. Actual 55.3 points.
• 14:00 US ISM Non-Manufacturing PMI. Estimate 53.5 points. Actual 53.1 points.
• 14:30 US Natural Gas Storage. Estimate -75B. Actual -74B.

*Key releases are highlighted in bold

*All release times are GMT

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