By Kenny Fisher
British pound continues its losing ways. In Monday's North American session, GBP/USD is trading in the low-1.63 range after coughing up over 100 points on the day. The pound has now surrendered about 300 points to the US dollar in the past week. Taking a look at economic releases, British Manufacturing PMI lost ground in January and missed the estimate. The news was not good out of the US either, as ISM Manufacturing PMI dropped to a ten-month low.
British PMI releases are in the spotlight, with three key releases over the course of the week. It was not an auspicious start as Manufacturing PMI dipped to 56.7 points, down from 57.3 a month earlier. This was shy of the estimate of 57.1 points. We'll get a look at the Construction PMI on Tuesday. If the index falls short of the estimate, the pound could lose more ground to the surging US dollar.
On Thursday, US Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348 thousand, up sharply from 326 thousand a week earlier. This was higher than the estimate of 331 thousand. The news was even worse from Pending Home Sales. The key indicator plunged 8.3%, its sharpest drop since April 2011. The markets were caught off guard by the news, as the estimate stood at -0.1%. This will raise concerns about the health of the US housing sector, as Existing Home Sales and New Home Sales also missed their estimates in December. The silver lining was courtesy of Advanced GDP, which posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the Q3 reading of 2.8%.
In the US, last week's Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348 thousand, up sharply from 326 thousand a week earlier. This was higher than the estimate of 331 thousand. The news was even worse from Pending Home Sales. The key indicator plunged 8.3%, its sharpest drop since April 2011. This will raise concerns about the health of the US housing sector, as Existing Home Sales and New Home Sales also missed their estimates in December. The silver lining on Thursday was courtesy of Advanced GDP, which posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the 2.8% gain in Q3. So where is the US economy headed? With GDP posting strong gains but employment numbers struggling, the recovery does not seem to be creating many new jobs, which could seriously hamper long-term economic growth.
In a highly anticipated decision, the US Federal Reserve pressed the taper trigger for a second month in a row last week. This reduces its stimulus program (QE) by another $10 billion, lowering the bond-buying scheme to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday’s policy statement was Bernanke's swan song, as Janet Yellen takes over the reins as the Fed chair on February 1.
GBP/USD for Monday, February 3, 2014
GBP/USD February 3 at 16:25 GMT
GBP/USD 1.6322 H: 1.6438 L: 1.6320
- GBP/USD continues to lose ground in Monday trading. The pair broke below the 1.64 line early in the European session and the pound remains under strong pressure in North American session.
- On the downside, 1.6231 is providing support to the pair. This is followed by support at 1.6125.
- 1.6329 has reverted to a resistance role as the pound continues to slide. This is followed by resistance at 1.6416.
- Current range: 1.6231 to 1.6329
Further levels in both directions:
- Below: 1.6231, 1.6125 and 1.6050
- Above: 1.6329, 1.6416, 1.6549, 1.6705 and 1.6964
OANDA's Open Positions Ratio
GBP/USD ratio is pointing to gains in long positions in Monday trading, continuing the trend we saw for much of last week. With the pound posting sharp losses, many short positions have been covered, resulting in a higher percentage of open long positions in the ratio. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar rally continuing.
The pound's woes continues, as the currency has lost over 100 points on Monday. GBP/USD continues to push lower in the North American session and could break below the 1.64 line.
- 9:30 British Manufacturing PMI. Estimate 57.1 points. Actual 56.7 points.
- US Treasury Secretary Jack Lew Speaks.
- 14:00 US Final Manufacturing PMI. Estimate 53.8 points. Actual 53.7 points.
- 15:00 US ISM Manufacturing PMI. Estimate 56.2 points. Actual 51.3 points.
- 15:00 US Construction Spending. Estimate 0.3%. Actual 0.1%.
- 15:00 US ISM Manufacturing Prices. Estimate 54.2 points. Actual 60.5 points.
- All Day - Total Vehicle Sales. Estimate 15.6M.
*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.