GBP/USD – British Pound Higher, Investors Eye U.K Employment Numbers

The British pound has started the week with gains. In the North American session, GBP/USD is trading at 1.3596, up 0.41% on the day. On the release front, there are no economic indicators in the U.K or the U.S. Tuesday will be busy, as the U.K. publishes unemployment claims and wage growth. Over in the U.S, the focus is on retail sales reports.

It was an uneventful week for the pound, and even a rate announcement from the Bank of England didn’t elicit much response from the currency. The markets were on the money with their estimates, correctly predicting that the bank would hold rates at 0.50% and that two of nine MPC members would vote for an immediate rate hike. In the BoE inflation report, policymakers noted concern over softness in consumer borrowing and the housing market. The markets were not surprised by the BoE decision, given the fact that first-quarter growth was just 0.1% and consumer spending and inflation levels weakened. On Friday, there was no relief from the NIESR GDP Estimate, which indicated a 0.1% expansion of the economy in April. Will economic growth rebound in the second quarter? Policymakers are adopting a wait-and-see attitude towards rate hikes, with any increase unlikely before August, which is when the next inflation report will be released.

With the U.S economy continuing to perform well in 2018, it comes as no surprise that the U.S consumer is feeling very optimistic. On Friday, the UoM Consumer Sentiment improved to 98.8 in April, beating the estimate of 98.4 points. The U.S labor market is at near or full employment, which has resulted in a slowdown in job growth due to a shortage of skilled workers. This was underscored last week, as JOLTS Job Openings climbed to a record 6.6 million. At the same time, inflation levels remain low, as the Federal Reserve target of 2 percent remains elusive. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. Inflation levels will be an important factor for the Fed in its monetary policy projection, which remains at two more hikes in 2018. The odds of a rate hike at the June hike stands close to 100%.

A crowded tale of the tape

U.S Dollars Plight shaped by Trade Talks and Geopolitics

GBP/USD Fundamentals

Monday (May 14)

  • 2:45 US FOMC Member Loretta Mester Speaks

Tuesday (May 15)

  • 4:30 British Average Earnings Index. Estimate 2.7%
  • 4:30 British Claimant Count Change. Estimate 13.3K
  • 4:30 British Unemployment Rate. Estimate 4.2%
  • 8:30 US Core Retail Sales. Estimate 0.5%
  • 8:30 US Retail Sales. Estimate 0.4%
  • 8:30 US Empire State Manufacturing Index. Estimate 15.1

*All release times are DST

*Key events are in bold

GBP/USD for Monday, May 14, 2018

GBP/USD May 11 at 11:45 DST

Open: 1.3541 High: 1.3608 Low: 1.3540 Close: 1.3596

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3301 1.3402 1.3494 1.3613 1.3712 1.3796

GBP/USD edged higher in the Asian and European sessions. The pair has posted small gains in North American trade

  • 1.3494 is providing support
  • 1.3613 is the next resistance line. It is weak and could be tested in the North American session
  • Current range: 1.3494 to 1.3613

Further levels in both directions:

  • Below: 1.3494, 1.3402, 1.3301 and 1.3186
  • Above: 1.3613, 1.3712 and 1.3796

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement in the Monday session. Currently, long positions have a majority (65%), indicative of trader bias towards GBP/USD continuing to head upwards.

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.