By Kenny Fisher
GBP/USD has started the week on a quiet note as the pair trades just above the 1.68 line. The pair has showed little movement for over a week. On the release front, there is just one event on the schedule. Pending Home Sales soared in March, posting its best numbers in close to a year. There are no UK releases on Monday, but the markets are keeping an eye on British Preliminary GDP, which will be released on Tuesday.
US housing numbers were on the weak side last week, but it was a different story on Monday, as Pending Home Sales soared in March. The key indicator jumped 3.4%, easily beating the estimate of 1.0%. This marked its biggest monthly gain since last May. The indicator has posted mostly declines in recent readings, so the strong gain was welcome news. Meanwhile, US consumers appear to be content as the UoM Consumer Sentiment jumped to 84.1 points in March, beating the estimate of 83.2. It marked the indicator's highest level since June. If the optimism continues and translates into increased consumer spending, this should bode well for the US economy.
On Friday, British Retail Sales, the primary gauge of consumer spending, posted a paltry gain of 0.1%, well off the previous reading of 1.7%. The good news was that the indicator beat the estimate of -0.4%, so the markets didn't react negatively to the news. Still, the weak reading points to slower growth in the economy. British BBA Mortgage Approvals also pointed to a decline in consumer spending. The housing indicator dipped to 45.9 thousand, a three-month low. This was well below the estimate of 48.9 thousand. Consumer spending is one of the engines of economic growth, so a decrease could spell trouble for the high-flying British pound.
There is no arguing that the British economy has enjoyed a strong recovery, but that does not mean that policymakers at the BOE see eye-to-eye on the health of the economy or inflation. Last week's BOE minutes indicated that Monetary Policy Committee members were "uncertain" about the amount of spare capacity in the economy and the medium-term inflation outlook. Importantly, the MPC voted unanimously to maintain the benchmark interest rate at 0.50%. With the unemployment rate down to 6.9%, there is growing speculation that we could see a rate hike as early as next spring, although the BOE has done its best to dampen expectations of a rate increase.
GBP/USD for Monday, April 28, 2014
GBP/USD April 28 at 15:30 GMT
GBP/USD 1.6812 H: 1.6857 L: 1.6778
- GBP/USD continues to trade close to the 1.68 line on Monday. The pair has showed some movement in both directions but has been unable to sustain any momentum and break away from the 1.68 line.
- 1.6765 is providing support. 1.6705 is stronger.
- 1.6896 is a strong resistance line, protecting the key 1.70 level.
Further levels in both directions:
- Below: 1.6765, 1.6705, 1.6549 and 1.6416
- Above: 1.6896, 1.70, 1.7210 and 1.7374.
OANDA's Open Positions Ratio
GBP/USD ratio is unchanged in Monday trading. This is consistent with the lack of movement from the pair. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias toward the dollar breaking out and posting gains.
The pound continues to trade close to the 1.68 line. GBP/USD has edged lower in the European session.
- 14:00 US Pending Home Sales. Estimate 1.0%. Actual 3.4%.