GBP/USD – Slight Losses As Markets Eye UK Inflation Indicators

GBP/USD is showing modest losses on Monday, but the pair remains at high levels, trading in the low-1.67 range in Monday’s North American session. The pound has been red hot in the month of February, climbing over 400 points against the retreating US dollar. In economic news, Rightmove HPI jumped 3.3%, its strongest gain in over a year. US markets are closed for a holiday, so there are no US releases. As well, there are no British events on the schedule. On Tuesday, the UK releases a host of inflation indicators, highlighted by CPI, and these numbers could impact on the movement of GBP/USD.

The markets had little to cheer about on Thursday as all three US key releases disappointed. Unemployment Claims rose to 337 thousand, above the estimate of 331 thousand. This reading comes on the heels of JOLTS Job Openings earlier in the week, which also missed market expectations. Core Retail Sales dropped to 0.0%, a nine-month low. The estimate stood at 0.1%. Retail Sales brought no relief, slipping to -0.4%, short of the estimate of 0.0%. The weak US numbers allowed the pound to continue its impressive rally.

BOE Governor Mark Carney has done his best to dampen speculation about a rate hike in recent months, but with the UK economy continuing to improve, he was forced to change his stance last week. Carney said that the central bank may have to raise interest rates in the second half of 2015 to keep inflation in check. The BOE sharply revised its growth forecast for 2014 to 3.4%, up from 2.8%, and added that inflation, which has fallen faster than expected, should remain close to the 2% target. The positive news was just the tonic the pound needed, and the currency responded with sharp gains.

Federal Reserve chair Janet Yellen didn’t generate much excitement in the markets when she testified before Congress earlier this week. She said that the Fed plans to continue trimming QE, provided that the employment picture continues to improve and inflation rises. She acknowledged that even though the unemployment rate has improved steadily, the recovery in the labor market is far from complete and the Fed plans to keep interest rates at ultra-low levels. Yellen, who took over as Fed chair on February 1, is expected to continue the policies of her predecessor, Bernard Bernanke.

GBP/USD for Monday, February 17, 2014

GBP/USD February 17 at 16:55 GMT

GBP/USD 1.6724 H: 1.6823 L: 1.6710

GBP/USD Technical

• GBP/USD has posted modest losses in Monday trading. The pound touched a high of 1.6823 early in the Asian session but has retracted sharply since then.
• On the downside, 1.6705 is under strong pressure. There is stronger support at 1.6549.
• 1.6896 is the next resistance line. Next is resistance at 1.6964, protecting the key 1.70 level.
• Current range: 1.6705 to 1.6896.

Further levels in both directions:

• Below: 1.6705, 1.6549, 1.6416, 1.6329 and 1.6231
• Above: 1.6896, 1.6964, 1.7087 and 1.7192

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged on Monday. This not consistent with the pair’s current movement, as the pound has posted modest losses against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar recovering from its sharp slide.

The pound has started the week with slight losses. With US markets closed for a holiday, traders can expect an uneventful North American session.

GBP/USD Fundamentals

• There are no UK or US releases on Monday.

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.