By Kenny Fisher
GBP/USD has lost close to one cent in Tuesday trading, as the pair trades in the low-1.62 range in the North American session. The pound lost its footing after British CPI fell to its lowest level in four years. Over in the US, Core CPI showed a modest gain of 0.2% gain, while CPI came in at a flat 0.0%. CBI Industrial Expectation Orders came in as expected.
There was plenty of data out of the UK on Tuesday. CPI, one of the most important economic events, dropped to 2.1%, down from 2.2% a month earlier. This was the index's lowest level since December 2009. Although the drop was a minor one, the trend has been downward since June. On a more positive note, the reading of 2.1% is closer to the BOE inflation target of 2.0%. Other inflation indicators were mixed. Meanwhile, CBI Industrial Expectation Orders showed little movement, rising slightly to 12 points, which matched expectations.
All eyes are keeping a close watch on the US Federal Reserve, which meets for a two-day policy meeting starting on Tuesday. The million dollar question is whether the Fed will announce a QE taper. Although there's a stronger likelihood that the Fed will wait until after the new year, Bernard Bernanke's swan song could surprise the markets if the Fed does take QE action this week. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper will likely boost the US dollar against the major currencies.
There was some good news on the fiscal front, as the US House of Representatives easily passed a budget deal on Thursday. The agreement, which will be voted on by the Senate next week, will remove the risk of a government shutdown and reduces the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the fiscal uncertainty we've seen in recent months.
GBP/USD for Tuesday, December 17, 2013
GBP/USD December 17 at 16:15 GMT
GBP/USD 1.6234 H: 1.6336 L: 1.6220
- GBP/USD has posted losses in Tuesday trading. The pair has been losing ground for much of the European and North American sessions.
- The round number of 1.6300 has reverted to a support role. This is followed by a resistance line at 1.6476.
- On the downside, the pair is testing support at 1.6231. Given the strong downward movement we are seeing from the pair, this line could fall during the North American session. This is followed by support at 1.6125.
- Current range: 1.6231 to 1.6300
Further levels in both directions:
- Below: 1.6231, 1.6125, 1.6000 and 1.5893
- Above: 1.6300, 1.6475, 1.66, 1.6705 and 1.6964
OANDA's Open Positions Ratio
GBP/USD ratio is almost unchanged in Monday trading. This is reflected in the pair's current movement, which has shown little activity on Monday. Short positions continue to dominate the ratio, reflecting a trader bias towards the US dollar making further gains against the pound.
The pair has posted losses and remains under pressure in the North American session, as GBP/USD is within striking distance of the 1.62 line.
- 9:30 British CPI. Estimate 2.2%. Actual 2.1%.
- 9:30 British PPI Input. Estimate -0.5%. Actual -0.7%.
- 9:30 British RPI. Estimate 2.7%. Actual 2.6%.
- 9:30 British Core CPI. Estimate 1.8%. Actual 1.8%.
- 9:30 British HPI. Estimate 4.2%. Actual 5.5%.
- 9:30 British PPI Output. Estimate -1.2%. Actual -0.2%.
- 11:00 British CBI Industrial Order Expectations. Estimate 12 points. Actual 12 points.
- 13:30 US Core CPI. Estimate 0.1%. Actual 0.2%.
- 13:30 US CPI. Estimate 0.1%. Actual 0.0%.
- 13:30 US Current Account. Estimate -101B. Actual -95B.
- 15:00 US NAHB Housing Market Index. Estimate 55 points. Actual 58 points.
*Key releases are highlighted in bold
*All release times are GMT
Disclosure: 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.