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By Kenny Fisher

The British pound has edged lower in Thursday trading, as GBP/USD trades in the mid-1.63 range. In the UK, it was an uneventful day as both the RICS House Price Balance and 30-year bonds showed little change in December. In the US, Unemployment Claims met expectations with another strong release, while the Philly Fed Manufacturing Index hit a three-month high. Core CPI looked weak, posted a gain of 0.1%. Later on, Fed chair Bernard Bernanke will deliver a speech in Washington.

US Unemployment Claims looked sharp, dropping slightly to 327 thousand, very close to the estimate of 326 thousand. This was welcome news after last week's shocking Non-Farm Payrolls. Meanwhile, the Philly Fed Manufacturing Index continues to move higher. The indicator jumped to 9.4 points, up from 7.0 points a month earlier. This strong reading beat the estimate of 8.8 points.

Weak inflation levels in the US remain a concern, as this is an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1%. On Tuesday, the Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. On Wednesday, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten.

On Tuesday, the UK released a host of December inflation indicators, and most of the releases were very close to the estimates. CPI, the most important inflation indicator, came in at 2.0%, almost unchanged from 2.1% in November. The estimate stood at 2.1%. The reading dovetails with the Bank of England's inflation target of 2.0%. CPI has been dropping in recent readings, and this lessens the pressure on the Bank of England to raise interest hikes in response to the improving UK economy.

Last week's disappointing Non-Farm Payrolls report may have created some concern in the markets, but is unlikely to change the Federal Reserve's path of tapering QE, which it started just this month. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each Fed policy meeting over the course of the year. The Fed next meets for a policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and we will see a reduction in QE at the next policy meeting.

GBP/USD for Thursday, January 16, 2014

Forex Rate Graph 21/1/13

GBP/USD January 16 at 16:30 GMT

GBP/USD 1.6342 H: 1.6384 L: 1.6315

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6125 1.6231 1.6329 1.6416 1.6549 1.6705

  • GBP/USD continues to post losses in Thursday trading. The pair touched a low of 1.6315 early in the European session.
  • 1.6416 continues to provide resistance. This is followed by a resistance line at 1.6549.
  • 1.6329 is providing support. This line has weakened as the pair trades at lower levels. This is followed by a support level at 1.6231.
  • 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 showing little change in Thursday trading. This is not reflected in the pair's movement, as the pound continues to lose ground against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to move higher.

The pound has posted modest losses in Thursday trading. The dollar continues to put pressure on the pound in the North American session.

GBP/USD Fundamentals

  • 00:01 British RICS House Price Balance. Estimate 59%. Actual 56%.
  • 10:35 British 30-year Bond Auction. Actual 3.59%.
  • 13:30 US Core CPI. Estimate 0.1%. Actual 0.1%.
  • 13:30 US CPI. Estimate 0.3%. Actual 0.3%.
  • 13:30 US Unemployment Claims. Estimate 327K. Actual 326K.
  • 13:30 US Treasury Secretary Jack Lew Speaks.
  • 14:00 US TIC Long-Term Purchases. Estimate 42.3B. Actual -29.3B.
  • 15:00 US Philly Fed Manufacturing Index. Estimate 8.8 points. Actual 9.4 points.
  • 15:00 US NAHB Housing Market Index. Estimate 58 points. Actual 56 points.
  • 15:30 US Natural Gas Storage. Exp. -296B. Actual -287B.
  • 16:10 US Fed Chair Bernard Bernanke Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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.

Source: GBP/USD - Limited Losses As U.S. Posts Strong Unemployment Claims