GBP/USD – Surging Pound Hits Five-Year Highs

GBP/USD continues to look sharp, as the pair trades just below the 1.69 level in the European session. In economic news, British Manufacturing PMI looked very sharp, while US Nonfarm Payrolls jumped in April and surprised the markets.

British releases looked sharp late last week, highlighted by an excellent reading from UK Manufacturing PMI. The index improved to 57.3 points, well above the estimate of 55.4 points. Nationwide HPI, an important gauge of activity in the housing industry, jumped 1.2%, crushing the estimate of 0.6%. There was more good news from Net Lending to Individuals, which posted its strong gain in five years. The indicator came in at GBP 2.9 billion, beating the estimate of 2.3 billion.

As expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

GBP/USD for Thursday, May 1, 2014

GBP/USD May 1 at 15:30 GMT

GBP/USD 1.6894 H: 1.6922 L: 1.6872

GBP/USD Technical

• GBP/USD continues to post gains. The pair touched a high of 1.6922 early in the European session.
• 1.6765 has strengthened in support as the pound trades at higher levels.
• On the upside, 1.6896 is being tested and could break during the North American session. Next is the key resistance level of 1.70, which has held firm since August 2009.

Further levels in both directions:

• Below: 1.6765, 1.6705, 1.6549 and 1.6416
• Above: 1.6896, 1.70, 1.7210 and 1.7374

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Thursday trading, reversing the direction seen a day earlier. This is consistent with the movement of the pair, as the pound continues to post gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of the dollar reversing its current downward trend.

The pound has posted gains and is trading just below the 1.69 line. The US dollar remains under pressure in the North American session.

GBP/USD Fundamentals

• 6:00 British Nationwide HPI. Estimate 0.6%. Actual 1.2%.
• 8:30 British Manufacturing PMI. Estimate 55.4 points. Actual 57.3 points.
• 8:30 British Net Lending to Individuals. Estimate 2.3B. Actual 2.9B.
• 8:30 British M4 Money Supply. Estimate -2.3%. Actual 0.9%.
• 8:30 British Mortgage Approvals. Estimate 67K. Actual 73K.
• 11:30 US Challenger Job Cuts. Actual 5.7%.
• 12:30 US Fed Chair Janet Yellen Speaks.
• 12:30 US Unemployment Claims. Estimate 317K. Actual 344K.
• 12:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.2%.
• 12:30 US Personal Spending. Estimate 0.7%. Actual 0.9%.
• 12:30 US Personal Income. Estimate 0.4%. Actual 0.5%.
• 13:45 US Final Manufacturing PMI. Estimate 55.8 points. Actual 55.4 points.
• 14:00 US ISM Manufacturing PMI. Estimate 54.3 points. Actual 54.9 points.
• 14:00 US Construction Spending. Estimate 0.5%. Actual 0.2%.
• 14:00 US ISM Manufacturing Prices. Estimate 59.4 points. Actual 56.5 points.
• 14:30 US Natural Gas Storage. Estimate 75B. Actual 82B.
• All Day – US Total Vehicle Sales. Estimate 16.2M.

*Key releases are highlighted in bold

*All release times are GMT

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