GBP/USD – Pound Steady As Construction PMI Meets Expectations

GBP/USD is showing little movement, as the currency markets have started off the week quietly. In Monday’s North American session, the pair is trading in the mid-1.68 range. The pound continues to struggle, as the currency lost about 140 points last week to the US dollar. In economic news, British Construction PMI came in at 62.4 points. In the US, today’s only release is Loan Officer Survey.

British PMIs are closely tracked by analysts, as they are important gauges of the health of key sectors in the British economy. Construction PMI posted a strong figure of 62.4 points last month, beating the estimate of 62.1 points. The index has been above the 60-point level since November, pointing to strong expansion in the UK construction sector. Last week, Manufacturing PMI softened in March, dropping to 55.4 points, short of the estimate of 57.2 points. This was the indicator’s lowest level since March. We’ll get a look at Services PMI on Tuesday.

US employment numbers failed to impress last week. On Friday, Nonfarm Payrolls took a tumble, slipping to 209 thousand, compared to 288 thousand a month earlier. This was well below the estimate of 231 thousand and marked a four-month low. Earlier in the week, Unemployment Claims rose to 302 thousand, very close to the estimate of 303 thousand. There was positive news from the manufacturing sector, as US ISM Manufacturing PMI rose to 57.1 points, its best showing since November. As well, UoM Consumer Sentiment continues to look strong, coming in at 81.8 points. The index has not been below the 80-point level in 2014, pointing to strong consumer confidence.

Last week, the Federal Reserve released a policy statement, with the Fed sounding somewhat dovish in tone. Policymakers acknowledged lower unemployment levels, but noted that “there remains significant underutilization of labor resources” in the economy. The Fed statement reinforces the view that the US central bank is in no rush to raise interest rates after the termination of QE, which is expected in October. As well, the Fed said that inflation levels have moved somewhat closer to the Fed’s target of 2.0%. The Fed has remained vague as to when it will raise interest rates, but if the economy continues moving in the right direction, a rate increase is likely before mid-2105.

GBP/USD for Monday, August 4, 2014

GBP/USD August 4 at 15:05 GMT

GBP/USD 1.6841 H: 1.6844 L: 1.6813

GBP/USD Technical

• GBP/USD was flat in the Asian session and edged higher late in European trading. The pair is unchanged in North American trade.
• On the downside, 1.6825 was breached earlier in the day and remains under strong pressure. The round number of 1.67 is stronger.
• 1.6920 is providing strong resistance.
• Current range: 1.6825 to 1.6920.

Further levels in both directions:

• Below: 1.6825, 1.6700, 1.6556 and 1.6484
• Above: 1.6920, 1.7000, 1.7183 and 1.7228

OANDA’s Open Positions Ratio

GBP/USD is pointing to gains in long positions in Monday trade. This is consistent with the movement of the pair, as the pound has made small gains. The majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar gaining ground.

GBP/USD Fundamentals

• 8:30 British Construction PMI. Estimate 62.4 points. Actual 62.1 points.
• Tentative – US Loan Officer Survey.

* Key releases are highlighted in bold

*All release times are GMT

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.