GBP/USD – Pound Steady as British Manufacturing PMI Meets Expectations

GBP/USD is unchanged, as the pair trades at 1.2240 in the North American session. On the release front, British Manufacturing PMI dipped to 54.3 points, slightly short of the forecast of 54.6 points. In the US, ISM Manufacturing PMI came in at 51.9 points, edging above the forecast of 51.8 points. On Wednesday, the UK releases Construction PMI. Over in the US, the Federal Reserve concludes its monthly policy meeting and is expected to maintain the benchmark interest rate at 0.25 percent.

British Manufacturing PMI, a key indicator, dropped to 54.3 in October, down from 55.3 a month earlier. Still, the PMI was within expectations and the pound has held its own against the US dollar on Tuesday. Britain’s economy grew in the third quarter, another indication that the UK appears to have escaped significant economic damage in the period subsequent to the Brexit vote in June. The British electorate’s decision in June to leave the European Union sent shock waves across the markets, which remain nervous about Brexit fallout, as Britain and the EU will have to sit down and negotiate an orderly departure. The markets are anxiously awaiting the BoE’s policy meeting on Thursday, as analysts continue to look for clues as to whether the bank will lower rates for the second time in four months. The markets are expecting the benchmark rate to remain unchanged at 0.25%, as higher inflation and generally positive economic numbers have lessened pressure on the BoE to ease monetary policy.

In the US, there was positive news from the consumer front on Monday, as Personal Spending rebounded with a 0.5% gain in September, after a flat reading of 0.0% in August. Gold responded to the reading with slight losses. This release comes on the heels of a disappointing consumer spending report on Friday, as UoM Consumer Sentiment fell to 87.2 points in October, below expectations and dropping to its lowest level since August 2015.  The Fed will also hold a policy meeting on Wednesday, but the markets aren’t expecting a rate move so close to the US presidential election. The rate statement will be carefully monitored, as analysts comb for hints about the extent of support among FOMC members ahead of the crucial December meeting.

GBP/USD Fundamentals

Tuesday (November 1)

• 5:30 British Manufacturing PMI. Estimate 54.6. Actual 54.3
• 9:45 US Final Manufacturing PMI. Estimate 53.3. Actual 53.4
• 10:00 US ISM Manufacturing PMI. Estimate 51.8. Actual 51.9
• 10:00 US Construction Spending. Estimate 0.5%. Actual -0.4%
• 10:00 US IBD/TIPP Economic Optimism. Estimate 48.7. Actual 51.4
• 10:00 US ISM Manufacturing Prices. Estimate 54.0. Actual 54.5
• All Day – US Total Vehicle Sales. Estimate 17.5M
• 20:01 British BRC Shop Price Index

Wednesday (November 2)

• 5:30 British Construction PMI. Estimate 51.9
• 8:15 ADP Nonfarm Employment Change
• 14:00 FOMC Statement
• 14:00 Federal Funds Rate. Estimate <0.50%. Actual <0.50%

*All release times are EDT

* Key events are in bold

GBP/USD for Tuesday, November 1, 2016

GBP/USD November 1 at 11:45 EDT

Open: 1.2235 High: 1.2281 Low: 1.2201 Close: 1.2244

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair posted gains in European trade but then retracted. GBP/USD has posted slight gains in the North American session
• 1.2120 is providing support
• 1.2272 was tested in resistance and is under pressure

Further levels in both directions:

• Below: 1.2120, 1.1954 and 1.1844
• Above: 1.2272, 1.2351 and 1.2479
• Current range: 1.2120 to 1.2272

OANDA’s Open Positions Ratio

GBP/USD ratio is showing slight movement towards long positions. Currently, long positions command a strong majority (67%), indicative of trader bias towards GBP/USD breaking out and moving higher.

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.