GBP/USD is slightly lower in the Thursday session, after considerable losses on Wednesday. In North American trade, the pair is trading at 1.3099, down 0.14% on the day. On the release front, British retail sales dropped 0.8%, weaker than the estimate of -0.4%. In the U.S, key indicators beat their estimate. The Philly Fed Manufacturing Index dropped to 22.2, above the estimate of 19.7 points. On the employment front, jobless claims dropped to 210 thousand, just below the estimate of 211 thousand. On Friday, Britain’s deficit is expected to narrow to GBP 4.6 billion and BoE Governor Mark Carney speaks at an event in New York.
British consumer indicators softened in September, and that could mean downwinds for the British pound. GBP/USD slipped 0.53% on Wednesday, as British CPI dropped to 2.4% in September, down from 2.7% in August. This marked a three-month low, but inflation still remains above the BoE target of 2 percent. A sharp decline in retail sales on Thursday could add to the pound’s downside risk, as the soft consumer numbers together with Brexit anxiety could dampen investor risk appetite.
Leaders attending an EU summit would all agree that Brexit is a critical issue, but it’s unlikely that the EU will issue a draft statement on Brexit, due to the deadlock in negotiations. The European leaders sounded pessimistic about reaching a deal, unless Theresa May brings fresh proposals to the table. With only five months until Britain departs the EU, the likelihood of a no-deal scenario is very real. France has published a draft bill that allows the government to impose custom inspections and visa requirements on British visitors, in the event that no deal is reached. There has been little progress on the thorny issue of the Irish border. The EU is insisting that it will not sign a withdrawal agreement with Britain, unless there is a backstop which allows Northern Ireland to remain in a customs union with the EU after Brexit. However, the British government is unlikely to agree to such a move, since it would require regulatory barriers within the United Kingdom. In a conciliatory move, Michel Barnier, chief Brexit negotiator for the EU, offered to extend the transition phase by 12 months, which would leave it in place until December 2021. This would give the sides more time to work on the shape of a new customs union as well as outstanding issues. On the European side, the mood over Brussels is so sour that officials are saying that they may not hold a November summit, unless substantial progress is made in the next several weeks.
Asia market update: a busy session is unfolding
GBP/USD Fundamentals
Thursday (October 18)
- 4:30 British Retail Sales. Estimate -0.4%. Actual -0.8%
- 8:30 US Philly Fed Manufacturing Index. Estimate 19.7. Actual 22.2
- 8:30 US Unemployment Claims. Estimate 211K. Actual 210K
- 10:00 US CB Leading Index. Estimate 0.5%
- 10:30 US Natural Gas Storage. Estimate 85B
- 12:15 US FOMC Member Randal Quarles Speaks
Friday (October 19)
- 4:30 British Public Sector Net Borrowing. Estimate 4.6B
- 12:10 BoE Governor Mark Carney Speaks
*All release times are DST
*Key events are in bold
GBP/USD for Thursday, October 18, 2018
GBP/USD October 18 at 9:45 DST
Open: 1.3115 High: 1.3116 Low: 1.3077 Close: 1.3099
GBP/USD Technical
| S1 | S2 | S1 | R1 | R2 | R3 |
| 1.2723 | 1.2852 | 1.2966 | 1.3173 | 1.3301 | 1.3447 |
GBP/USD ticked lower in the Asian session. The pair posted gains in European trade but gave up most of these gains. GBP/USD is steady in North American trade
- 1.2966 is providing support
- 1.3173 is the next resistance line
- Current range: 1.2966 to 1.3173
Further levels in both directions:
- Below: 1.2966, 1.2852 and 1.2723
- Above: 1.3173, 1.3301, 1.3447 and 1.3527
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