GBP/USD – Slight Gains for Cable, US Jobless Claims Dip

The pound has posted slight gains on Thursday, as GBP/USD is trading just above the 1.49 line at the start of the  North American session. In economic news, it’s a quiet day as the markets wind down ahead of the Christmas holiday. In the UK, BBA Mortgage Approvals came in a 45.0 thousand, short of the forecast of 46.2 thousand. Over in the US, Unemployment Claims improved last week, dipping to 267 thousand.

There were no surprises from British GDP in the third quarter. Final GDP posted a gain of 0.4%, close to the estimate of 0.5%. This follows the Second Estimate GDP, which came in at 0.5%. Meanwhile, the UK current account deficit widened in the third quarter to GBP 17.5 billion, up from GBP 16.8 billion. Although this figure was better than the estimate of GBP 22.2 billion, the pound remains vulnerable to a persistently weak current account position. There was other bad deficit news earlier in the week, as Public Sector Net Borrowing ballooned to GBP 13.6 billion deficit in November, up from GBP 7.5 billion a month earlier.

The British pound has been on a steep slide since the start of November, losing some 500 points in that time span. After posting seven consecutive daily losses, the pound has bounced back, posting gains of about 100 points in the past two days. Investor confidence in the pound has sagged as the UK economy has been struggling. CPI, the prime gauge of consumer inflation, has recorded a gain above 0.1% only once in 2015. Employment numbers disappointed in November, as Claimant Count Change rose unexpectedly to 3.9 thousand, much higher than the estimate of 0.9 thousand.

In one of the most important economic events in 2015, the US Federal Reserve raised interest rates by 0.25 percent, the first rate hike since June 2006. The Fed got the rate ball rolling back in October, when it surprised the markets when it released a statement that it was seriously considering raising rates. Predictably, this caused a buzz in the markets about the Fed’s plans, as speculation earlier in the year about a rate hike failed to materialize. To the credit of Fed chief Janet Yellen and her colleagues, the Fed put into place a carefully-crafted strategy, sending a steady of stream of signals that it was intending to tighten monetary policy, if economic conditions remained positive. This gave the markets ample time to price in a rate hike, and currency market volatility was not excessive after the US rate hike, the first in almost 10 years. Although a hike of 0.25 percent is expected to have limited economic impact, the Fed move has given the US economy a critical vote of confidence, and this will be duly noted by the global markets. As well, this move is expected to be the first in a series of incremental rate hikes over the course of 2016, and higher interest rates means that the US dollar will become even more attractive to investors, at the expense of other currencies, such as the British pound.

GBP/USD Fundamentals

Thursday (Dec. 24)

• 9:30 British BBA Mortgage Approvals. Estimate 46.2K. Actual 45.0K
• 13:30 US Unemployment Claims. Estimate 270K . Actual 267K
• 13:30 US Unemployment Claims. Estimate 270K
• 15:30 US Natural Gas Storage. Estimate -26B. Actual -32B

*Key releases are highlighted in bold

*All release times are GMT

GBP/USD for Thursday, December 24, 2015

GBP/USD December 24 at 14:05 GMT

GBP/USD 1.4920 H: 1.4936 L: 1.4868

GBP/USD Technical

• GBP/USD was flat in the Asian session and posted slight gains in European trade.
• 1.4813 has strengthened in support
• 1.4952 is a weak resistance line
• Current range: 1.4813 to 1.4952

Further levels in both directions:

• Below: 1.4813, 1.4695 and 1.4601
• Above: 1.4952, 1.5026 and 1.5153

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged on Thursday, reflective of the lack of significant movement from the pair. Long positions command a strong majority (64%). This is indicative of trader bias towards the pound continuing to moving higher.

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