GBP/USD – British pound slips on PMI, Brexit worries

GBP/USD has posted considerable losses in the Thursday session, showing significant movement for the first time this week. In North American trade, the pair is trading at 1.3102, down 0.52% on the day. There is only one key event on the calendar. U.S. employment claims dipped to 223 thousand, below the estimate of 225 thousand. On Friday, the focus will be on employment numbers, as the U.S. releases wage growth and nonfarm payrolls.

With the Federal Reserve continuing to send a dovish message to the markets, we may not see a rate hike in the first half of 2019. After four rate hikes last year, the Fed has become much more dovish, and this stance was reinforced by Jerome Powell in testimony before Congress. On Tuesday, Boston Fed President Eric Rosengren, who is a considered a hawk on monetary policy, said that there was some downside risk to the U.S. economy and called on policymakers to be “patient” for several more meetings in order to evaluate the risks to the economy. Without being explicit, Rosengren appears to support the Fed remaining on the sidelines for upcoming policy meetings until the Fed can better gauge the health of the U.S. economy.

Ahead of Brexit, investors will be watching British economic data closely, and soft numbers could trigger a loss of confidence in the U.K. economy and the British pound. February PMI reports have been soft, and the pound has responded this week with losses. On Wednesday, Services PMI edged up to 51.3, above the 50-level which separates contraction from expansion. Still, the reading points to stagnation in the services sector. Earlier in the week, construction PMI dropped to 49.5, the first time that the PMI has indicated contraction since March 2018. The turmoil over Brexit is at least partly to blame for soft construction numbers, as clients re-evaluate whether to take on commercial projects in a time of uncertainty. Last week, manufacturing PMI dipped to 52.0, marking a 4-month low. Aside from Brexit jitters, the U.S.-China trade war has also taken a toll on the economy, in particular on the export and manufacturing sectors.

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GBP/USD Fundamentals

Thursday (March 7)

  • 3:30 Halifax HPI. Estimate 0.1%. Actual 5.9%
  • 4:00 British MPC Member Tenreyo Speaks
  • 7:30 US Challenger Job Cuts. Estimate 117.2%
  • 8:30 US Revised Nonfarm Productivity. Estimate 1.5%. Actual 1.9%
  • 8:30 US Revised Unit Labor Costs. Estimate 1.7%. Actual 2.0%
  • 8:30 US Unemployment Claims. Estimate 225K. Actual 223K
  • 10:30 US Natural Gas Storage. Estimate -141B. Actual -149B
  • 12:15 US FOMC Member Brainard Speaks
  • 15:00 US Consumer Credit. Estimate 16.4B

Friday (March 8)

  • 4:30 British Consumer Inflation Expectations
  • 8:30 US Average Hourly Earnings. Estimate 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 181K
  • 8:30 US Unemployment Rate. Estimate 3.9%
  • 8:30 US Building Permits. Estimate 1.29M
  • 22:00 US Federal Chair Powell Speaks

*All release times are EST

*Key events are in bold

GBP/USD for Thursday, March 7, 2019

GBP/USD March 7 at 12:15 EST

Open: 1.3171 High: 1.3185 Low: 1.3089 Close: 1.3102

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2831 1.2910 1.3070 1.3170 1.3258 1.3362

GBP/USD showed little movement in the Asian session. The pair posted losses in European trade and has posted slight losses in North American trade

  • 1.3070 is providing support
  • 1.3170 is the next resistance line
  • Current range: 1.3070 to 1.3170

Further levels in both directions:

  • Below: 1.3070, 1.2910 and 1.2831
  • Above: 1.3170, 1.3258, 1.3362 and 1.3460