The British pound has had a very slow week, trading in a narrow range against the US dollar. In Tuesday's North American session, GBP is trading just above the 1.64 line. The pound has run into some turbulence, shedding about 150 points since January 1. In economic news, the US trade deficit narrowed to $-34.3 billion, well below the forecast. On Monday, ISM Non-Manufacturing PMI dropped sharply to 53.0 points. As expected, the Senate confirmed Janet Yellen to head the Federal Reserve, starting in February. There are no British releases on Tuesday.
As expected, the US Senate confirmed Susan Yellen as chair of the Federal Reserve by a wide margin on Monday. Yellen becomes the first woman to head the powerful central bank. She has been a strong supporter of outgoing chair Bernard Bernanke, who lowered interest rates and implemented a QE program in order to boost a struggling US economy. Yellen takes over the helm of the Federal Reserve on February 1 and will chair her first policy meeting in March.
On Friday, Federal Reserve Chair Bernard Bernanke gave a cautious thumbs-up to the US economy, saying that we could be in for a period of faster growth. Bernanke is winding up eight years at the helm of the Fed, which included several rounds of QE. The Fed has started to taper QE, with a cut of $10 billion to the $85 billion in assets, which the Fed has been purchasing each month. The Fed will meet at the end of January, and another taper of $10 billion is a strong possibility. Meanwhile, Bernanke reiterated that the taper did not mean that interest rates would be increased.
We’ll get a look at some key employment numbers this week, including Unemployment Claims, Non-Farm Payrolls and the Unemployment Rate. Last week’s Unemployment Claims were almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand. The Non-Farm Payrolls release could impact on the next Fed decision, after 2013 ended with QE tapering. While it was small, the Fed did indeed change policy, and this could have a significant positive impact on the US dollar. Meanwhile, ISM Non-Manufacturing PMI disappointed with a reading of 53.0 points, well off the estimate of 54.6 points.
Over in the UK, PMIs have been very strong lately, indicative of a strengthening British economy. However, Services PMI dropped to 58.8 points in November, down from 60.0 the month before. This was lower than the estimate of 60.4, and marked the first time that the index has fallen below the 60-point level since June. Last week, Construction PMI posted a slight drop in November. Although the PMI readings remain high, the pound could feel some heat if additional British releases fall short of their estimates. Over in the US, the ISM Non-Manufacturing PMI dropped from 53.9 to 53.0 points, missing the estimate of 54.6 points.
GBP/USD for Tuesday, January 7, 2014
GBP/USD January 7 at 16:35 GMT
GBP/USD 1.6406 H: 1.6438 L: 1.6375
- GBP/USD is showing very little movement in Tuesday trading, as the pair has been trading near the 1.64 line throughout the day.
- 1.6329 is providing strong support. This is followed by support at 1.6231.
- On the upside, 1.6416 is providing weak resistance. This is followed by stronger resistance at 1.6549.
- Current range: 1.6329 to 1.6416
Further levels in both directions:
- Below: 1.6329, 1.6231, 1.6125 and 1.6000
- Above: 1.6416, 1.6549, 1.6705, 1.6964 and 1.7182
OANDA's Open Positions Ratio
GBP/USD ratio is almost unchanged in Tuesday trading. This is reflected in what we're seeing from the pair, which continues to show little activity. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving to higher ground.
The pound continues to look listless this week. The pair is staying close to the 1.64 line and movement could remain limited during the North American session.
- 13:30 US Trade Balance. Estimate -40.2B. Actual -34.3B.
*Key releases are highlighted in bold
*All release times are GMT
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