GBP/USD – Pound Ticks Lower, Markets Eye Durable Goods, Powell Testimony

The British pound has posted slight losses in the Monday session. In North American trade, GBP/USD is trading at 1.3958, down 0.08% on the day. On the release front, there are no key British indicators. In the US, New Home Sales dropped to 593 thousand, well off the estimate of 655 thousand. This marked the smallest gain since August. Tuesday will be much busier, with the US releasing durable goods and consumer confidence reports. As well, Federal Chair Jerome Powell will testify before the House Financial Services Committee.

It hasn’t been a smooth ride for Jerome Powell, who took over as chair of the Federal Reserve from Janet Yellen earlier this month. Powell received a rude welcome from the markets just after moving into his new office, as the global stock market correction erased some $4 trillion in valuations. The volatility forced Powell to make a public statement, reassuring the markets that the Fed was  closely monitoring the situation. Powell will be on center stage this week, when he makes separate appearances before the House of Representatives and the Senate. After the recent stock markets volatility, Powell may opt to play it safe and keep away from any splashy headlines, which could lead to more fluctuation in the markets. Powell could choose to focus on the strong US economy and the Fed trimming its balance sheet, and steer away from a discussion of accelerating rate policy in order to head off higher inflation.

Brexit negotiations have been bumpy from the start, but matters seem to be deteriorating almost daily. Prime Minister May is in a tough spot, with the Europeans dismissing her latest proposals on a trade deal after Brexit, and many members of her party supporting playing hard with Europe. May has proposed that a trade deal would allow some divergence with EU regulations in certain industries, but the Europeans have dismissed this as ‘cherry picking’, which they say is a non-starter. May will lay out her post-Brexit vision of relations with the EU in a speech on Friday and if the Europeans pour cold water on her plan, the markets could react negatively.

British GDP for Q4 was a disappointment last week, but the pound has managed to hold its own against the dollar. GDP was revised downwards to 0.4%, down from 0.5% in the initial estimate. Looking at growth for all of 2017, GDP was revised lower from 1.8% to 1.7%, its worst showing since 2012. The weak readings are being attributed to lower production and weaker consumer spending. Consumers are being squeezed by a weaker British pound as well as high inflation, which is running at a 3% clip, compared to the BoE target of 2%.

GBP/USD Fundamentals

Monday (February 26)

• 4:30 British High Street Lending. Estimate 37.2K. Actual 40.1K
• 10:00 US New Home Sales. Estimate 655K. Actual 593K
• 13:00 BoE Deputy Governor Jon Cunliffe Speaks
• 15:15 US FOMC Member Randal Quarles Speaks

Tuesday (February 27)

• 8:30 US Fed Chair Jerome Powell Testifies
• 8:30 US Core Durable Goods Orders. Estimate 0.4%
• 8:30 US Durable Goods Orders. Estimate -2.4%
• 10:00 US CB Consumer Confidence. Estimate 126.2

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, February 26, 2018

GBP/USD February 26 at 12:40 EDT

Open: 1.3969 High: 1.4071 Low: 1.3928 Close: 1.3958

GBP/USD Technical

GBP/USD posted gains in the Asian session. In European trade, the pair continued to move higher but then retracted. GBP/USD continues to move lower

• 1.3901 is providing support
• 1.4010 is the next resistance line

Current range: 1.3901 to 1.4010

Further levels in both directions:

• Below: 1.3901, 1.3809 and 1.3744
• Above: 1.4010, 1.4128, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing a split between short and long positions. This is indicative of a lack of trader bias as to what direction GBP/USD will take next.

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.