GBP/USD – Steady As Unemployment Claims Within Expectations

For the second straight day, the British pound is trading quietly in the mid-1.60 range. The pound has not had a good week, dropping about 130 points so far. In the UK, Nationwide HPI continues to climb, but GfK Consumer Confidence fell short of the estimate. Over in the US, Unemployment Claims came in very close to the estimate, and the Federal Reserve announced that it was maintaining current QE levels.

US Unemployment Claims looked solid on Thursday, ending a string of weak employment releases. Unemployment Claims dropped from 350 to 340 thousand, edging below the estimate of 341 thousand. The recent government shutdown had pushed up claims in recent weeks as laid-off workers applied for benefits, but unemployment claims have been dropping since the reopening of the government in October. On Wednesday, ADP Non-Farm Payrolls dropped to 130 thousand in September, compared to 166 thousand the month before. This was well off the estimate of 151 thousand. It was the indicator’s lowest level showing six months and underscores that the US labor market is struggling to create new jobs.

The Federal Reserve wrapped up its policy meeting on Wednesday, the first meeting since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed’s policy statement was less dovish than expected, as the Fed noted that the economy was expanding “at a moderate pace” and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

Over in the UK, Nationwide HPI rose 1.0%, beating the estimate of 0.7%. The index is an important gauge of activity in the British housing sector, and the markets were pleased by the solid release. The news was not as good from GfK Consumer Confidence, which dropped to -11 points, short of the estimate of -8 points. On Friday, we’ll get a look at Manufacturing Production, this week’s major British event.

GBP/USD for Thursday, October 31, 2013

GBP/USD October 31 at 15:30 GMT

GBP/USD 1.6042 H: 1.6068 L: 1.6006

GBP/USD Technical

• GBP/USD remains steady in Thursday trading, as the pair trades in the mid-1.60 range.
• The pair continues to face resistance at 1.6125. This is followed by resistance at 1.6231, which has some breathing room as the pair trades below 1.61.
• On the downside, there is support at the round number of 1.6000. This is a weak line, and could see pressure if the US dollar shows some strength. This is followed by a support level at 1.5877.
• Current range: 1.6000 to 1.6125.

Further levels in both directions:

• Below: 1.6000, 1.5877, 1.5756 and 1.5645
• Above: 1.6125, 1.6231, 1.6300, 1.6421 and 1.6512

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in Thursday trading. This is consistent with the movement of the pair, which is not showing much movement. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar moving to higher ground.

After its slide earlier this week, the pound has settled down. We could see the pair’s subdued activity continue in the North American session.

GBP/USD Fundamentals

• 00:05 British GfK Consumer Confidence. Estimate -8 points. Actual -11 points.
• 7:00 British Nationwide HPI. Estimate 0.7%. Actual 1.0%.
• 12:30 US Unemployment Claims. Exp. 341K. Actual 340K.
• 13:00 US Treasury Secretary Jack Lew Speaks.
• 13:45 US Chicago PMI. Exp. 55.1 points. Actual 65.9 points.
• 14:30 US Natural Gas Storage. Exp. 35B. Actual 38B.

*Key releases are highlighted in bold

*All release times are GMT

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