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By Kenny Fisher

The British pound is on a roll and has climbed above the 1.66 line on Thursday. GBP/USD is currently trading at its highest level since August 2011. In economic news, the pound shrugged off a weak reading from CBI Realized Sales, which dropped sharply in December. In the US, Unemployment Claims posted another strong reading of 326 thousand, beating the estimate. US Existing Home Sales did not fare as well, as the key indicator continues to lose ground.

In the US, Unemployment Claims was unchanged at 326 thousand, another strong reading. This beat the estimate of 331 thousand. US Exiting Home Sales dropped to 4.87 million, shy of the estimate of the 4.94 million. This was the indicator's fourth consecutive drop, adding to concern about the health of the US housing industry.

The UK Unemployment Rate dropped to 7.1% in December, down from 7.4% a month earlier. The reading caught the attention of the markets, as the BOE has previously stated that the 7.0% unemployment level was a threshold at which it would consider raising interest rates, which currently are at 0.50%. However, the market excitement is likely premature, as the BOE has recently noted that the 7.0% threshold would by no means trigger a rate increase. In the minutes of the BOE's recent policy meeting, published on Wednesday, the Bank noted that the 7.0% level would likely be met earlier than anticipated, but this did not mean that the BOE would immediately respond with a rate hike. Nonetheless, the pound shot higher on Wednesday and there's little doubt that the Bank will feel increased pressure to raise rates if the unemployment rate continues to drop.

Concerns over weak inflation are not restricted to Europe or Japan, as the US has also been plagued by persistently low inflation, an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1% in December. Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Last week, Chicago Fed President Charles Evans said that the low rate of US inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten. Analysts will be watching closely whether incoming Fed chair Janet Yellen shares these sentiments. Yellen takes over the helm of the Federal Reserve on February 1, replacing Bernard Bernanke.

GBP/USD for Thursday, January 23, 2014

Forex Rate Graph 21/1/13

GBP/USD January 23 at 16:35 GMT

GBP/USD 1.6608 H: 1.6637 L: 1.6557

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6329 1.6416 1.6549 1.6705 1.6964 1.7182
  • GBP/USD continues to post gains in Thursday trading. The pair has been trading close to the 1.66 line for most of the day.
  • On the downside, 1.6549 continues to provide support. This is followed by a stronger line at 1.6416.
  • 1.6705 is the next line of resistance. This is followed by resistance at 1.6964.
  • Current range: 1.6549 to 1.6705

Further levels in both directions:

  • Below: 1.6549, 1.6416, 1.6329, 1.6231, 1.6125 and 1.6000
  • Above: 1.6705, 1.6964 and 1.7182

OANDA's Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions in Thursday trading. This is a result of strong gains by the US dollar, which have led to numerous long positions being covered, resulting in a higher percentage of open short positions. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing its downward movement.

GBP/USD continues its impressive rally, which has seen the pound gain close to 200 points this week. The pound is steady in the North American session.

GBP/USD Fundamentals

  • 9:00 Bank of England MPC Member Paul Fisher Speaks.
  • 10:34 British 10-year Bond Auction. Actual 2.87%.
  • 11:00 British CBI Realized Sales. Estimate 28 points. Actual 14 points.

14:00 US Flash Manufacturing PMI. Estimate 55.2. Actual 53.7 points.

  • 14:00 US HPI. Exp. 0.4%. Actual 0.1%.
  • 15:00 US Existing Home Sales. Estimate 4.94M. Actual 4.87M.
  • 15:00 US CB Leading Index. Estimate 0.2%. Actual 0.1%.
  • 15:30 US Natural Gas Storage. Estimate -112B. Actual -107B.
  • 16:00 US Crude Oil Inventories. Estimate 0.7M. Actual 1.0M.

*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.

Source: GBP/USD - Surging Pound Punches Past 1.66