GBP/USD - Pound Hits 5-Year Highs On Strong Manufacturing PMI

 |  Includes: DBV, FXB, GBB, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The British continues to gain ground against the dollar. In Thursday's North American session, GBP/USD is trading just shy of the 1.69 line. GBP/USD has now gained about 100 points on the week, and the pair finds itself at its highest level since August 2009. In economic news, British Manufacturing PMI climbed to a four-month high, easily beating the estimate. There was more good news as Nationwide HPI and Net Lending to Individuals both posted gains in April. Over in the US, Unemployment Claims was a disappointment, as the indicator jumped to a nine-week high. There was better news from ISM Manufacturing PMI, which beat the forecast. Federal Reserve chair, Janet Yellen, addresses a bank conference in Washington, and the markets will be all ears following the Fed policy statement earlier this week.

The pound keeps on rolling and received a lift from a number of positive releases on Thursday. The highlight was an excellent reading from UK Manufacturing PMI. The index improved to 57.3 points, well above the estimate of 55.4 points. Nationwide HPI, an important gauge of activity in the housing industry, jumped 1.2%, crushing the estimate of 0.6%. There was more good news from Net Lending to Individuals, which posted its strong gain in five years. The indicator came in at GBP 2.9 billion, beating the estimate of 2.3 billion.

In the US, it was a familiar story of mixed numbers from key economic releases. US Unemployment Claims was weak, as the key indicator jumped to 344 thousand, well above the estimate of 317 thousand. It marked a nine-week high for the employment indicator, and comes just a day before Nonfarm Payrolls is released. If the latter follows suit with a weak reading, we could see the dollar take a hit. Meanwhile, ISM Manufacturing PMI hit a four-month high, as the index rose to 55.4 points. This was slightly shy of the estimate of 55.8 points.

As expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn't get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a "considerable time" after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

British Preliminary GDP, one of the most important economic indicators, posted a strong gain of 0.8% in Q4, just shy of the estimate of 0.9%. There are three versions of British GDP, and the Preliminary indicator is the earliest and the most important. The positive release points to continuing economic growth, and will likely lead to continuing speculation about a rate hike from the Bank of England, which is likely sometime in 2015, if not earlier.

GBP/USD for Thursday, May 1, 2014

Forex Rate Graph 21/1/13

GBP/USD May 1 at 15:30 GMT

GBP/USD 1.6894 H: 1.6922 L: 1.6872

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6549 1.6705 1.6765 1.6896 1.7000 1.7210
Click to enlarge
  • GBP/USD continues to post gains. The pair pushed touched a high of 1.6922 early in the European session.
  • 1.6765 has strengthened in support as the pound trades at higher levels.
  • On the upside, 1.6896 is being tested and could break during the North American session. Next is the key resistance level of 1.70, which has held firm since August 2009.

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 pointing to gains in long positions in Thursday trading, reversing the direction seen a day earlier. This is consistent with the movement of the pair, as the pound continues to post gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of the dollar reversing its current downward trend.

The pound has posted gains and is trading just below the 1.69 line. The US dollar remains under pressure in the North American session.

GBP/USD Fundamentals

  • 6:00 British Nationwide HPI. Estimate 0.6%. Actual 1.2%.
  • 8:30 British Manufacturing PMI. Estimate 55.4 points. Actual 57.3 points.
  • 8:30 British Net Lending to Individuals. Estimate 2.3B. Actual 2.9B.
  • 8:30 British M4 Money Supply. Estimate -2.3%. Actual 0.9%.
  • 8:30 British Mortgage Approvals. Estimate 67K. Actual 73K.
  • 11:30 US Challenger Job Cuts. Actual 5.7%.
  • 12:30 US Fed Chair Janet Yellen Speaks.
  • 12:30 US Unemployment Claims. Estimate 317K. Actual 344K.
  • 12:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.2%.
  • 12:30 US Personal Spending. Estimate 0.7%. Actual 0.9%.
  • 12:30 US Personal Income. Estimate 0.4%. Actual 0.5%.
  • 13:45 US Final Manufacturing PMI. Estimate 55.8 points. Actual 55.4 points.
  • 14:00 US ISM Manufacturing PMI. Estimate 54.3 points. Actual 54.9 points.
  • 14:00 US Construction Spending. Estimate 0.5%. Actual 0.2%.
  • 14:00 US ISM Manufacturing Prices. Estimate 59.4 points. Actual 56.5 points.
  • 14:30 US Natural Gas Storage. Estimate 75B. Actual 82B.
  • All Day - US Total Vehicle Sales. Estimate 16.2M.

*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.