GBP/USD – British pound edges higher, investors eye UK job numbers

The British pound has recorded slight gains in the Monday session. In North American trade, the pair is trading at 1.3266, up 0.24% on the day. On the release front, British Rightmove HPI surprised with a decline of -0.1%, its first decline since December. In the U.S, core retail sales dropped to 0.4%, matching the estimate. Retail sales dropped to 0.5%, edging above 0.4%. On Tuesday, BoE Governor speaks before the Treasury Select Committee, and the U.K will release wage growth and unemployment rolls. In the U.S, Federal Reserve Chair Jerome Powell testifies before the Senate Banking Committee.

The U.S economy is firing on all cylinders and received a vote of confidence from the head of the Federal Reserve. On Thursday, Powell said that the economy is “in a really good place”, pointing to President Trump’s massive tax cut scheme and increased spending as key factors in boosting economic growth. Powell did not address monetary policy and said he was uncertain as to the effects of the current trade disputes which has embroiled the U.S and its trading partners. The Fed will likely press the rate trigger in the second half of the year, but it is an open question as to whether we’ll see one hike over the next six months. The Fed is projecting growth of 2.8% in 2018, compared to 2.3% in 2017. Powell will be in the spotlight next week when he appears for his semi-annual testimony before Congress.

Trade policy is not part of the Federal Reserve’s mandate, but Fed policymakers continue to voice concern about the escalating trade war between the U.S and its major trading partners, particularly China. On Friday, Dallas Fed President Robert Kaplan said he would have to downgrade his outlook if the tariff battle continues. Kaplan said that U.S tariffs on steel and aluminum imports had dampened capital expenditures plans and further trade tensions could lead to currency fluctuations and geopolitical instability.

As the Brexit deadline creeps ever closer, both sides are making contingency plans for a ‘hard Brexit’, in the event that the parties fail to reach an agreement. On Thursday, the British government released a white paper, which is a blueprint for trade arrangements with the EU when Britain leaves the club in March 2019. The proposal suggests that the UK and the EU will enter into an “association agreement”, which maintains current agreements with regards to goods but not services. This could have a significant negative impact on London’s financial hub, which is already facing the loss of hundreds of financial jobs from London to the continent. Prime Minister May is facing strong opposition from hardliners in her cabinet, who argue that the white paper leaves the EU too much control over British trade policy and could hamper British trade deals. Will the Europeans buy what May is selling? EU policymakers are reviewing the white paper and if it is rejected, investors could get panicky and send the pound lower.

  Trade ,earnings ,teapots and the US dollar

China Q2 GDP growth as expected, though lower than Q1

 

GBP/USD Fundamentals

Sunday (July 15)

  • 19:01 British Rightmove HPI. Actual -0.1%

Monday (July 16)

  • 8:30 US Core Retail Sales. Estimate 0.4%. Actual 0.4%
  • 8:30 US Retail Sales. Estimate 0.4%. Actual 0.4%. Actual 0.5%
  • 8:30 US Empire State Manufacturing Index. Estimate 20.3. Actual 22.6
  • 10:00 US Business Inventories. Estimate 0.4%

Tuesday (July 17)

  • 4:00 BoE Governor Mark Carney Speaks
  • 4:30 British Average Earnings Index. Estimate 2.5%
  • 4:30 British Claimant Count Change. Estimate 2.3K
  • 4:30 British Unemployment Rate. Estimate 4.2%
  • Tentative – British NIESR GDP Estimate
  • 9:15 US Capacity Utilization Rate. Estimate 78.4%
  • 9:15 US Industrial Production. Estimate 0.5%
  • 10:00 US Federal Reserve Jerome Powell Testifies
  • 10:00 US NAHB Housing Market Index. Estimate 69
  • 16:00 US TIC Long-Term Purchases. Estimate 34.3B

*All release times are DST

*Key events are in bold

 

GBP/USD for Monday, July 16, 2018

GBP/USD July 13 at 10:25 DST

Open: 1.3235 High: 1.3293 Low: 1.3224 Close: 1.3266

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3088 1.3186 1.3263 1.3494 1.3613 1.3712

GBP/USD posted small gains in the Asian and European sessions. The pair is showing little movement in North American trade

  • 1.3263 has switched to a support level after gains by GBP/USD on Monday. It is a weak line
  • 1.3494 is the next of resistance
  • Current range: 1.3263 to 1.3494

Further levels in both directions:

  • Below: 1.3263, 1.3186, 1.3088 and 1.2996
  • Above: 1.3494, 1.3613 and 1.3712