GBP/USD – Pounds Pushes Higher on Strong Manufacturing Data

GBP/USD continues to make steady progress on Wednesday, as the has pound has posted strong gains and has pushed above the 1.53 line. In the UK, Manufacturing Production posted a respectable gain of 0.5%, which was within expectations. The NIESR GDP Estimate came in at 0.5%, unchanged from a month earlier. Over in the US, Crude Oil Inventories fell to 3.1 million, but this beat expectations. Traders should keep a close eye on two key releases on Thursday – US Unemployment Claims and the Federal Reserve Policy Meeting Minutes. 

All eyes are on the Federal Reserve, which will release the minutes of its last policy meeting on Thursday. For months, expectations had been running high that the Federal Reserve might press the rate trigger and bump up rates at the September meeting. However, the Fed stayed on the sidelines and maintained rates, and the US dollar faced broad pressure from its rivals as a result. At the same time, the policy statement had a hawkish tone, giving the markets hope that the Fed could still make a move prior to the end of the year. These hopes have been largely dashed by a dismal US Nonfarm Payrolls report late last week, as just 142 thousand jobs were created, compared to an estimate of 201 thousand. However, market sentiment can change fairly quickly, and if the US rebounds with some strong data, we’ll likely see more optimism about a rate hike. With this background in mind, Thursday’s minutes take on added significance and could have a strong impact on the currency markets.

GBP/USD Fundamentals

Wednesday (Oct. 7)

• 8:30 Manufacturing Production. Estimate 0.4%. Actual 0.5%.

This key indicator rebounded in the August report, posting a gain of 0.5%, compared to a reading of -0.8% in July. The pound has responded with modest gains against the dollar in Wednesday trading.

•  14:00 NIESR GDP Actual 0.5%.

This indicator, released monthly, helps analysts track official GDP, which is only released on a quarterly basis. According to the indicator, GDP rose 0.5% in Q3, unchanged from the estimate a month earlier.

• 14:30 Crude Oil Inventories. Estimate 2.2 million. Actual 3.1 million.

The indicator posted a strong surplus for a second straight month, and easily beat expectations. However, this week’s reading of 3.1 million was considerably smaller than the previous week’s release of 4.0 million.

Upcoming Key Events

Thursday (Oct. 8)

• 11:00 MPC Official Bank Rate Votes. Estimate 8-1

The September vote to hold rates at 0.50% is expected to be 8:1, unchanged from the August vote (8 members in favor of maintaining rates, 1 member in favor of raising rates).

• 11:00 BOE Monetary Policy Summary

These reports provide details of the decision-making process regarding the BOE’s monetary policy, and analysts will be looking for clues as to possible future monetary moves by the central bank.

• 11:00 Official Bank Rate. Estimate 0.50% 

The BOE has maintained the benchmark interest rate at 0.50% since 2009, and no change is expected in the October rate announcement.

• 11:00 Asset Purchase Facility. Estimate GBP 375 billion.

The BOE has been purchasing assets in the open market (QE) at a level of 375 billion pounds annually, and no change is expected in the October announcement. The BOE will also release the vote for the September decision, which is expected to be 9-0 in favor of maintaining QE at its current level.

• 12:30 US Unemployment Claims

This is one of the most important economic indicators, and traders should treat it as a market-mover. Unemployment Claims rose slightly last week to 277 thousand, but this was within expectations. Given the dismal Nonfarm Payrolls report last week, a weaker reading than expected could send the US dollar lower.

• 18:00 Federal Reserve FOMC Meeting Minutes

The markets will be watching this event closely, given the continuing speculation about a rate hike by the Federal Reserve. Any hints about a rate hike could boost the US dollar against the pound.

• 18:00 BOE Governor Mark Carney Speaks

Carney will speak at the IMF meeting in Lima, Peru. The markets will be listening closely for any clues about possible changes in the BOE’s monetary policy.

GBP/USD for Wednesday, October 7, 2015

GBP/USD October 7 at 14:10 GMT

GBP/USD 1.5321 H: 1.5327 L: 1.5223

GBP/USD Technical

• GBP/USD was steady in the Asian session and posted strong gains in European trading.
• On the downside, 1.5269 is providing support. 1.5163 is next.
• 1.5341 is the next resistance line and is under strong pressure.
• Current range: 1.5269 to 1.5341

Further levels in both directions:

• Below: 1.5269, 1.5163, 1.5026 and 1.4922
• Above: 1.5341, 1.5485, 1.5590 and 1.5660

OANDA’s Open Positions Ratio

GBP/USD ratio has a majority of long positions (57%), indicative of trader bias towards the pound 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.