The British pound has picked up where it left off last week and is showing little movement in Monday trading. In the North American session, GBP/USD is trading in the mid-1.61 range. Taking a look at economic releases, British and US releases have started the week on a sour note. British CBI Realized Sales tumbled from 34 to 2 points, a four-month low. The scene was repeated in the US, as Pending Home Sales plunged 5.6%, its worst result in over two years.
There was positive news out of the UK on Friday, as Preliminary GDP posted a strong gain of 0.8%, up from 0.6% the month before. The reading matched market expectations, and this is likely to increase speculation about whether the BOE might raise interest rates in the near future, despite repeated assurances from BOE Governor Mark Carney that he has no intention of doing so before 2015. However, if key indicators continue to improve, Carney and his colleagues may have to seriously consider slicing rates sooner rather than later.
Last week ended on a disappointing note as key US releases posted declines. Core Durable Goods Orders dropped -0.1%, well below the estimate of a 0.6% gain. This was the third straight decline for the indicator. Durable Goods Orders looked much better, posting a strong gain of 3.7%. UoM Consumer Sentiment couldn't find its footing, dropping from 77.5 to 73.2 points, its weakest showing in 2013. The estimate stood at 78.2 points. Monday brought no relief, as US Pending Home Sales shocked the markets with a slide of -5.6%. The markets had expected a slight gain of 0.5%. It was the key housing indicator's worst reading since April 2011.
US employment releases did not look sharp last week, continuing to raise concerns about the health of the US economy. On Thursday, Unemployment Claims came in at 350 thousand, above the estimate of 343 thousand. This weak figure came on the heels of Non-Farm Payrolls, which slipped to a six-month low. The US unemployment rate dipped to 7.2%, a five-year low, but this does not point to increased employment, as the participation rate remained at 63.8%, its lowest level since 1978. These figures indicate that the US labor market continues to have difficulty creating new jobs.
The US government is again functioning and a default has been averted, but the recent agreement hammered out in Congress provides short-term relief only, as it raises the debt ceiling until early February and funds the government until mid-January. The underlying budgetary issues remain unresolved, consumer confidence has been shaken and employment numbers are not looking good, as we saw last week. Given this situation, the Fed is unlikely to reduce QE until early 2014, perhaps as late as March or April.
GBP/USD" border="0" height="300" width="400">
GBP/USD October 28 at 13:40 GMT
GBP/USD 1.6164 H: 1.6208 L: 1.6136
GBP/USD Technical" title="GBP/USD Technical" height="82" width="579">
- GBP/USD is trading quietly in Monday trading, as the pair trades in the mid-1.61 range.
- GBP/USD continues to face resistance at 1.6231. This is followed by resistance at the round number of 1.6300.
- On the downside, there is support at 1.6125. This line could face pressure if the dollar shows some strength. Next, there is support at the key level of 1.6000.
- Current range: 1.6125 to 1.6231.
Further levels in both directions:
- Below: 1.6125, 1.6000, 1.5877, 1.5756 and 1.5645
- Above: 1.6231, 1.6300, 1.6421 and 1.6512
OANDA's Open Positions Ratio
GBP/USD is pointing to movement towards short positions on Monday, continuing the trend we saw on Friday. This is consistent with the movement of the pair, as the dollar has posted very slight gains against the pound. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar moving to higher levels.
GBP/USD is trading quietly in the mid-1.61 range. The pair has shrugged off weak US and UK releases earlier today, so we could see GBP/USD continue to drift during the North American session.
GBP/USD Fundamentals
- 11:00 British CBI Realized Sales. Estimate 33 points. Actual 2 points.
- 13:15 US Capacity Utilization Rate. Exp. 78.1%. Actual 78.3%.
- 13:15 US Industrial Production. Exp. 0.5%. Actual 0.6%.
- 14:00 US Pending Home Sales. Exp. 0.5%. Actual -5.6%.
- 13:20 Bank of England Chief Economist Spencer Dale Speaks.