GBP/USD – Unchanged as UK Manufacturing Data Shines

The pound has posted strong gains on Thursday, as GBP/USD is trading in the mid-1.54 range. In the UK, CBI Industrial Order Expectations jumped to 10 points. Over in the US, unemployment claims looked excellent, dropping sharply to 283 thousand. However, the Philly Fed Manufacturing Index had a poor showing in February, dropping to 5.2 points.

Key US indicators painted a mixed picture on Thursday. Unemployment Claims rebounded strongly with a sharp drop of 283 thousand, compared to 304 thousand a week earlier. This easily beat the estimate of 293 thousand. The news was not as good from the Philly Fed Manufacturing Index, which slipped to 5.2 points, down from 5.3 points and a third straight drop. The markets had expected a reading of 8.8 points.

On Wednesday, the Federal Reserve released the minutes of its previous policy meeting. The minutes were decidedly dovish in nature, as Fed policymakers raised concerns that a mid-year rate hike could hurt the economic recovery. The Fed also said it was worried about the impact of global events on the US economy, such as the slowdown in China and the Greek financial crisis. With US inflation at low levels, the Fed is not in any rush to raise rates, so speculation of a mid-year rate may have been premature.

There was more good news out of the UK on Thursday, as Industrial Order Expectations climbed to 10 points, up sharply from the previous release of 4 points. This beat the estimate of 7 points, and marked a 6-month high for the manufacturing indicator. The strong release follows excellent employment numbers for December. Claimant Count Change came in at -38.6 thousand, while the unemployment rate dropped to 5.6%.

British inflation indicators continue to point to sagging inflation. CPI, the primary gauge of consumer inflation, dipped to 0.3% in January, down from 0.5% a month earlier. This marked a record low reading, and BOE Governor Mark Carney is now required to write a letter to the Chancellor of the Exchequer for a second straight month, as inflation remains more than 1% below the BOE’s target of 2.0%. Weak inflation levels have eased pressure on the BOE to raise rates, raising speculation that the central bank will not raise rates in 2015. With the US Federal Reserve moving in the opposite direction, divergence with the BOE could weigh on the pound.

GBP/USD for Thursday, February 19, 2015

GBP/USD February 19 at 16:15 GMT

GBP/USD 1.5439 H: 1.5465 L: 1.5404

GBP/USD Technical

• GBP/USD was flat in the Asian session. The pair edged lower in European trade but has recovered these losses in the North American session.
• 1.5392 remains a weak support line. There is stronger support at 1.5282.
• 1.5505 is an immediate resistance line.
• Current range: 1.5392 to 1.5505

Further levels in both directions:

• Below: 1.5392, 1.5282, 1.5165, 1.5008 and 1.4873
• Above: 1.5505, 1.5642, 1.5786 and 1.5888

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged on Thursday. This is consistent with the lack of movement from the pair. The ratio has a majority of long positions, indicative of trader bias towards the pound moving higher.

GBP/USD Fundamentals

• 11:00 British CBI Industrial Order Expectations. Estimate 7 points. Actual 11 points.
• 13:30 US Unemployment Claims. Estimate 293K. Actual 283 thousand.
• 15:00 US Philly Fed Manufacturing Index. Estimate 8.8 points. Actual 5.2 points.
• 15:00 US CB Leading Index. Estimate 0.4%. Actual 0.2%.
• 15:30 US Natural Gas Storage. Estimate -110B. Actual -111B.
• 16:00 US Crude Oil Inventories. Estimate -1.8M. Actual 7.7M.

*Key releases are highlighted in bold

*All release times are GMT

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.