GBP/USD – Pound Steady Despite Weak UK Consumer Indicators

GBP/USD is steady on Friday, as the pair trades in the low-1.63 range in the European session. The pound shrugged off some weak consumer indicators, as Consumer Confidence and Net Lending to Individuals were well short of their estimates. In the US, the markets will be closing early on Friday. There are no US releases on the schedule.

The pound has enjoyed strong gains this week at the expense of the dollar, but the rally has taken a pause on Friday after some weak data out of the UK. GfK Consumer Confidence continues to look weak, coming in at -12 points, short of the estimate of -8 points. Net Lending to Individuals, an important gauge of consumer borrowing and spending, dropped to 1.7 billion pounds, missing the estimate of 2.1 billion. These weak readings indicate that consumer confidence and spending remain weak, despite the improvement in the British economy. Other consumer indicators, notably Retail Sales, also point to weak consumer spending, which is an important catalyst of economic activity. Meanwhile, Nationwide HPI dropped to 0.6%, a three-month low, but managed to match the forecast.

GBP/USD has climbed to its highest levels since January, following an upbeat Financial Stability report from the BOE on Wednesday. The Bank stated that risks to financial stability had lessened as economic growth appears to be improving. At the same time, the BOE warned that a sharp rise in interest rates could threaten financial stability. This message is similar to what we heard from Governor Mark Carney when he testified before a parliamentary committee earlier this week. Carney sought to dampen growing expectations of an interest hike, saying that economy still has plenty of slack and that the BOE might hold off on a rate hike even if unemployment fell below the 7% level.

Over in the US, Unemployment Claims dropped for a second straight week. The key indicator dropped to an eight-week low of 316 thousand, easily beating the estimate of 331 thousand. With increasing speculation about a QE taper, employment releases will remain under the market microscope. If employment numbers continue to improve, we can expect the Fed to scale down QE early in 2014, which would likely give a big boost to the US dollar.

GBP/USD for Friday, November 29, 2013

GBP/USD November 29 at 12:10 GMT

GBP/USD 1.6334 H: 1.6375 L: 1.61315

GBP/USD Technical

• GBP/USD is steady in Friday trading. The pair touched a high of 1.6375 during the Asian session but has edged lower.
• 1.6300 continues to provide support. This is not a strong line and could face pressure if the pound gives up some gains. This is followed by support at 1.6231.
• On the upside, the pair faces resistance at 1.6476. This is followed by resistance at the round number of 1.6600, which has remained intact since August 2011.
• Current range: 1.6300 to 1.6476

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in Friday trading. This is reflected in the pair’s current movement, as the pound has settled down on Friday. Short positions continue to dominate the ratio, reflecting a trader bias towards the US dollar posting gains against the pound.

The pair is having a quiet day, and with the US markets closing early due to a holiday, any movement from the pair during the North American session is likely to be limited.

GBP/USD Fundamentals

• 00:05 British GfK Consumer Confidence. Estimate -8 points. Actual -12 points.
• 7:00 British Nationwide HPI. Estimate 0.6%. Actual 0.6%.
• 9:30 British Net Lending to Individuals. Estimate 2.1B. Actual 1.7B.
• 9:30 British M4 Money Supply. Estimate 0.1%. Actual 1.1%.
• 9:30 British Mortgage Approvals. Estimate 68K. Actual 68K.

*Key releases are highlighted in bold

*All release times are GMT

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