BoE Hearing and Fed Minutes in Focus

US Futures Continue to Pare Last Week’s Gains

US equity markets are expected to open in the red again on Wednesday, tracking losses in Europe as stocks continue to pare last week’s strong rebound.

It’s been a relatively quiet start to the morning and the week, with the bank holiday in the US and Canada contributing to this. The European session has been dominated by economic data releases so far and that’s likely to continue, with flash manufacturing and services data due from the US shortly after the open. It’s the FOMC minutes that will be released later in the day though that will likely be the standout event from a US perspective, particularly as the statement caused quite a stir at the end of January.

US Yield Curve Now (Orange) and on 29 January 2018 (Purple)

Source – Thomson Reuters Eikon

The sell-off in the markets may have come a couple of days later but part of the initial trigger was a more hawkish sounding Fed, with the jobs report then being the straw that broke the camel’s back two days later. While the minutes may not generate quite the same response, traders will likely monitor what they say very closely for signs that policy makers are now leaning more towards three to four rate hikes this year, rather than two or three.

EUR/USD – Euro Ticks Lower as German Manufacturing PMI Softens

GBP Slips as Unemployment Ticks Higher

Sterling is coming under a bit of pressure this morning after UK jobs data for the three months to December showed wages still growing at a moderate pace and unemployment ticking up to 4.4%. While a higher reading on wage growth may have triggered a more bullish response from the pound, the data turned out to be quite insignificant as it’s unlikely to change the views at the Bank of England.

UK Unemployment Rate

Wages have been slowly ticking higher recently and they could continue to do so as workers demand more due to the higher cost of living and a tight labour market. The move higher in the unemployment rate won’t be a concern at this moment with it potentially being a one-off move and still very low. As long as inflation remains at upper range of what is deemed acceptable, the central bank seems intent on raising rates at least once more this year, despite the temporary factors driving it and economic uncertainty that lies ahead.

Yield-o-Mania

BoE Inflation Report Hearing Eyed as Markets Price in Rate Hikes

Members of the Monetary Policy Committee including Governor Mark Carney will appear before the Treasury Select Committee later on today, during which they will be questioned on their latest inflation report forecasts and expectations for interest rates going forward. While it’s always interesting to get the views of policy makers and the pound will likely be volatile throughout, I wonder how much of what they have to say will now already be priced in, with at least one rate hike now expected this year.

GBPUSD Daily Chart

OANDA fxTrade Advanced Charting Platform

With that in mind and with Brexit transition negotiations likely to dominate the next month, we could see the pound lose some of the momentum that’s been gathering over the last six months or so. It’s recent failed to make new highs on two occasions against the dollar and it’s also slipping against the yen in a possible sign that traders are beginning to lock in profits ahead of what could be a difficult month.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

FX Market Analysis – 20 February 2018 (Video)

Senior Market Analyst Craig Erlam discusses this week’s key event risks, with the most notable being the UK jobs report and BoE inflation report hearing.

Craig also gives his live analysis on EURUSD (11:04), GBPUSD (15:13), EURGBP (17:04), AUDUSD (18:36), USDCAD (20:02), GBPCAD (22:01), NZDUSD (24:47), USDJPY (25:44), GBPJPY (26:47) and EURJPY (28:24).

USD/JPY – Dollar Punches Above 107 Yen, Fed Minutes Ahead

Higher Yields Pushing Dollar Up

Intermezzo

GBP/USD – Pound Dips at Start of Week

The British pound is trading quietly in the Monday session. In North American trade, GBP/USD is trading at 1.4002, down 0.21% on the day. On the release front, there are no US events, with US markets closed for Presidents’ Day. In the UK, Rightmove HPI gained 0.8%, its strongest gain in four months. On Tuesday, the UK releases CBI Industrial Order Expectations.

GBP/USD gained 1.3% last week, as the dollar continued to lose ground to its major rivals. However, the dollar rebounded with gains on Friday, following strong US housing and consumer confidence reports on Friday. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points. Despite stock market volatility, consumer confidence was boosted by the recent tax reform package and a red-hot labor market.

Should cryptocurrencies be regulated? Bitcoin has seen wild fluctuations in recent months, ranging from under $1000 to just under $20,000. There are growing calls for these currencies to be regulated, and central banks could play a key role in such a move. However, last week, ECB President Mario Draghi poured cold water on any ECB involvement, saying that it was not the ECB’s responsibility to ban or regulate Bitcoin. Draghi added that the ECB was exploring the use of blockchain, a digital technology to monitor bitcoin transactions. Still, with Bitcoin gaining more and more popularity, the Bank of England and other central banks will have to pay greater to attention to the impact of Bitcoin on the currency markets.

GBP/USD Fundamentals

Sunday (February 18)

  • 19:01 British Rightmove HPI. Actual 0.8%

Monday (February 19)

  • 14:45 BOE Governor Carney Speaks

Tuesday (February 20)

  • 6:00 British CBI Industrial Order Expectations

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, February 19, 2018

GBP/USD February 19 at 12:25 EDT

Open: 1.4032 High: 1.4050 Low: 1.3959 Close: 1.4002

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3744 1.3809 1.3901 1.4010 1.4128 1.4271

GBP/USD posted gains but then retracted in Asian trade. In the European session, the pair showed limited movement. In North American trade, GBP/USD headed lower but has recovered

  • 1.3901 is providing support
  • 1.4010 was tested earlier in resistance and remains under pressure

Current range: 1.3901 to 1.4010

Further levels in both directions:

  • Below: 1.3901, 1.3809 and 1.3744
  • Above: 1.4010, 1.4128, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing a majority for short positions (54%). This is indicative of trader bias towards GBP/USD continuing to move lower.

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.

US Indices on Course For Full House

Futures Point to Full Week of Gains After Sharp Correction

US equity markets could end the week with a full house of gains as long as indices manage to hold onto the small gains being seen in futures ahead of the open.

This would also bring an end to two shocking weeks for equity markets that saw more than 10% quickly wiped off indices, the first time we’ve seen such a move since the start of 2016. While the prospect of higher yields and interest rates, combined with a surge in volatility, have been blamed for the decline, the rebound we’re now seeing reaffirms the belief that fundamentals are still strong which should prevent the situation deteriorating further.

There are a few economic releases that traders will likely be aware of as the week draws to a close. The UoM consumer sentiment reading is always an interesting release, given the importance of the consumer to the US economy. Building permits and housing starts will also be released ahead of the open on Friday. The bulk of companies may have already reporting numbers for the fourth quarter but there are still some more to come today, with 13 due to release earnings including Coca Cola and Kraft Heinz.

US Bond Auction TIPS the dollar

Sterling Resilient After Poor Retail Sales Figures

UK retail sales data for January was once again disappointing, providing further evidence that the post-Brexit squeeze on consumers is heaving an economic impact. While this could be partially reversed as sterling continues to rebound off its lows and wage growth picks up to offset higher living costs – assuming it does – we’re seeing few signs that the squeeze is easing and that’s being reflected in the spending figures.

The pound has actually been quite resilient to the data in the aftermath of the release. While it has since declined against the dollar, this has primarily been driven by the bounce in the greenback. The consumer squeeze and economic implications of it are already known and priced in, traders are far more concerned with wages and inflation and the impact this will have on interest rates, which makes the jobs report next Wednesday far more important.

GBPUSD Daily Chart

OANDA fxTrade Advanced Charting Platform

Bitcoin Struggling to Overcome Psychological Barrier

Bitcoin is once again threatening the psychological $10,000 barrier but as was the case on Thursday, it’s struggling to maintain its push above and once again finds itself falling slightly short. While a break above $10,000 should be no more significant than any other, it would appear to represent an end to the plunge in bitcoin that saw it fall around 70% from its mid-December highs and for this reason, it’s proving a difficult hurdle to overcome.

Bitcoin (CME) Daily Chart

Source – Thomson Reuters Eikon

Those expecting a similar response to breaking above $10,000 that we saw last time – a near 100% increase in less than three weeks – may also be disappointed. We’re not seeing the kind of euphoria that accompanied the break at the end of November when the speculative fomo trade was contributing greatly to its meteoric rise. The crash of the last couple of months has made this less of a one-way move and those that got burned may not be so keen to jump back in.

DAX Gains Ground as Dollar Under Pressure

All of this is assuming that bitcoin will break above $10,000 which is far from certain when you consider the gradual – by its own standard – bounce from its lows. This could quite easily be another corrective move and the lows may be tested once again. The absence of a constant negative news flow is helping but whether this can be sustained is debatable.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD – Pound Higher as Sentiment Remains Negative on Greenback

The British pound continues to head higher this week. In North American trade, GBP/USD is trading at 1.4067, up 0.48% on the day. On the release front, there are no British events on the schedule. In the US, PPI gained 0.4%, matching the forecast. Core PPI also gained 0.4%, beating the estimate of 0.2%. Both indicators rebounded after declines in the previous month. Unemployment Claims climbed to 230 thousand, just above the estimate of 229 thousand. On Friday, the US releases key housing and consumer confidence numbers. The UK will release Retail Sales.

The pound has posted winning sessions every day this week, and has continued the upward trend on Thursday. GBP/USD has gained 1.7% this week, and punched above the 1.41 line earlier on Thursday. The pound posted strong gains on Wednesday, as US consumer spending reports were weaker than expected. Still, US fundamentals remain solid, as the US economy is showing strong expansion, the labor market remains at capacity, and inflation levels are moving higher. This has led some analysts to attribute the recent sag in the US dollar to technical factors rather than fundamental reasons.

With US inflation indicators pointing higher in January, the Fed will be reevaluating its projection for rate hikes in 2018. Currently, the Fed is planning three hikes this year, but that could change to four, or even five hikes, if inflation continues to head upwards and the robust US economy maintains its strong expansion.  The new head of the Federal Reserve, Jerome Powell, received a rude welcome from the stock markets, as he started his new position last week. Powell sought to send a reassuring message on Tuesday, saying that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time.

GBP/USD Fundamentals

Thursday (February 15)

  • 8:30 US PPI. Estimate 0.4%. Actual 0.4%
  • 8:30 US Core PPI. Estimate 0.2%. Actual 0.4%
  • 8:30 US Empire State Manufacturing Index. Estimate 17.7. Actual 13.1
  • 8:30 US Philly Fed Manufacturing Index. Estimate 21.5. Actual 25.8
  • 8:30 US Unemployment Claims. Estimate 229K. Actual 230K
  • 9:15 US Capacity Utilization Rate. Estimate 78.0%. Actual 77.5%
  • 9:15 US Industrial Production. Estimate +0.2%. Actual -0.1%
  • 10:00 US NAHB Housing Market Index. Estimate 72. Actual 72
  • 10:30 US Natural Gas Storage. Estimate -193B. Actual -194B
  • 16:00 US TIC Long-Term Purchases. Estimate 50.3B

Friday (February 16)

  • 4:30 British Retail Sales. Estimate 0.5%
  • 8:30 US Building Permits. Estimate 1.29M
  • 8:30 US Housing Starts. Estimate 1.23M
  • 8:30 US Import Prices. Estimate 0.6%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.4

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, February 15, 2018

GBP/USD February 15 at 11:30 EDT

Open: 1.3999 High: 1.4100 Low: 1.3995 Close: 1.4067

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3809 1.3901 1.4010 1.4128 1.4271 1.4345

GBP/USD continues to break through resistance levels. On Thursday, GBP/USD inched higher in the Asian session. In European trade, the pair posted considerable gains. GBP/USD edged higher in North American trade but has given up these gains

  • 1.4010 is providing support
  • 1.4128 is the next line of resistance

Current range: 1.4010 to 1.4128

Further levels in both directions:

  • Below: 1.4010, 1.3901, 1.3809 and 1.3744
  • Above: 1.4128,, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

GBP/USD ratio is showing gains in long positions. Currently, short and long positions are evenly split, indicative of a lack of trader bias as to what direction GBP/USD will take next.

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.

GBP/USD – Pound Jumps as US Inflation Drags Down Dollar

The British pound has posted gains in the Wednesday session. In North American trade, GBP/USD is trading at 1.3867, up 0.53% on the day. On the release front, consumer inflation beat expectations. CPI jumped 0.5%, above the estimate of 0.3%. Core CPI remained steady at 0.3%, edging above the forecast of 0.2%. consumer spending reports were dismal. Retail Sales was flat at 0.0%, short of the estimate of 0.5%. Core Retail Sales declined 0.3%, well off the forecast of +0.2%. The sole British event, CB Leading Index declined 0.2%.

The US dollar has posted broad losses in the North American session, as CPI indicators were higher than expected. Concerns of high inflation was a catalyst for the market sell-off last week, and fears of resumption in the downward spiral are weighing on the dollar. What about the Federal Reserve? Currently, the Fed is planning three hikes this year, but that could change to four, or even five hikes, if inflation continues to head upwards and the robust US economy maintains its strong expansion.  The new head of the Federal Reserve, Jerome Powell, received a rude welcome from the stock markets, as he started his new position last week. Powell sought to send a reassuring message on Tuesday, saying that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time.

There were no surprises from British inflation numbers on Tuesday. CPI, the primary gauge of consumer spending, was unchanged at 3.0% in January. CPI has hovered around the 3% level since August, well above the BoE target of 2.0%. Wage growth has not kept up with the brisk clip of inflation, putting a further squeeze on the British consumer. This could dampen consumer spending, a key driver of the economy. High inflation is putting pressure on the Bank of England to raise interest rates, and last week the Bank said that it was considering faster and larger rate increases than it had projected back in November. Many analysts have circled May as the date of the next rate increase.

GBP/USD Fundamentals

Wednesday (February 14)

  • 8:30 US CPI. Estimate 0.3%. Actual 0.5%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.3%
  • 8:30 US Core Retail Sales. Estimate 0.5%. Actual 0.0%
  • 8:30 US Retail Sales. Estimate +0.2%. Actual -0.3%
  • 9:30 British CB Leading Index. Actual -0.2%
  • 10:00 US Business Inventories. Estimate 0.3%. Actual 0.4%
  • 10:30 US Crude Oil Inventories. Estimate 2.8M. Actual 1.8M

Thursday (February 15)

  • 8:30 US PPI. Estimate 0.4%
  • 8:30 US Empire State Manufacturing Index. Estimate 17.7
  • 8:30 US Philly Fed Manufacturing Index. Estimate 21.5
  • 8:30 US Unemployment Claims. Estimate 229K
  • 9:30 British CB Leading Index. Actual -0.2%
  • 10:00 US Business Inventories. Estimate 0.3%. Actual 0.4%.
  • 10:30 US Crude Oil Inventories. Estimate 2.8M. Actual 1.8M

*All release times are GMT

*Key events are in bold

GBP/USD for Wednesday, February 14, 2018

GBP/USD February 14 at 11:40 EDT

Open: 1.3893 High: 1.3972 Low: 1.3801 Close: 1.3867

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3613 1.3744 1.3809 1.3901 1.4010 1.4128

GBP/USD inched higher in the Asian session but then recorded losses in European trade. The pair has posted sharp gains in North American trade

  • 1.3809 is providing support
  • 1.3901 was tested earlier in resistance. It is a weak line and could break in the North American session

Current range: 1.3809 to 1.3901

Further levels in both directions:

  • Below: 1.3809, 1.3744, 1.3613
  • Above: 1.3901, 1.4010, 1.4128 and 1.4271

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Wednesday session. Currently, short positions have a majority (55%), indicative of trader bias towards GBP/USD reversing directions and moving lower.

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.

GBP/USD – Pound Higher as British CPI Surprises Markets

The British pound has posted gains in the Tuesday session. In North American trade, GBP/USD is trading at 1.3892, up 0.39% on the day. On the release front, British CPI was unchanged at 3.0%, edging above the forecast of 2.9%. There are no major events out of the US. On Wednesday, the US releases inflation and retail sales data. Traders should be prepared for some movement from the pair during the North American session.

There were no surprises from British inflation numbers on Tuesday. CPI, the primary gauge of consumer spending, was unchanged at 3.0% in January. CPI has hovered around the 3% level since August, well above the BoE target of 2.0%. Wage growth has not kept up with the brisk clip of inflation, putting a further squeeze on the British consumer. This could dampen consumer spending, a key driver of the economy. High inflation is putting pressure on the Bank of England to raise interest rates, and last week the Bank said that it was considering faster and larger rate increases than it had projected back in November. Many analysts have circled May as the date of the next rate increase.

A key factor in last week’s market turbulence was investor concern over more rate hikes due to inflation. Given this concern, it’s likely that the US CPI and Core CPI releases on Wednesday will be a market-mover. The markets will be glued to the inflation indicators, and if inflation numbers are higher than expected, we could see some volatility from the US dollar as well as the stock markets.

GBP/USD Fundamentals

Tuesday (February 13)

  • 4:30 British CPI. Estimate 2.9%. Actual 3.0%
  • 4:30 British PPI Input. Estimate 0.7%. Actual 0.7%
  • 4:30 British RPI. Estimate 4.1%. Actual 4.0%
  • 4:30 British Core CPI. Estimate 2.6%. Actual 2.7%
  • 4:30 British HPI. Estimate 4.9%. Actual 5.2%
  • 4:30 British PPI Output. Estimate 0.2%. Actual 0.1%
  • 6:00 US NFIB Small Business Index. Estimate 106.2. Actual 106.9
  • 8:00 US FOMC Member Loretta Mester Speaks

Wednesday (February 14)

  • 8:30 US CPI. Estimate 0.3%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Core Retail Sales. Estimate 0.2%
  • 8:30 US Retail Sales. Estimate 0.5%

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, February 13, 2018

GBP/USD February 13 at 12:00 EDT

Open: 1.3837 High: 1.3924 Low: 1.3833 Close: 1.3892

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3613 1.3744 1.3809 1.3901 1.4010 1.4128

GBP/USD posted small gains in the Asian and European sessions. The pair continues to move higher in North American trade

  • 1.3809 is providing support
  • 1.3901 was tested earlier in resistance. It is a weak line and could break in the North American session

Current range: 1.3809 to 1.3901

Further levels in both directions:

  • Below: 1.3809, 1.3744, 1.3613
  • Above: 1.3901, 1.4010, 1.4128 and 1.4271

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Tuesday session. Currently, short positions have a majority (55%), indicative of trader bias towards GBP/USD reversing directions and moving lower.

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.

GBP/USD – Pound Ticks Lower, Investors Eye British CPI

The British pound has posted small losses in the Monday session. In North American trade, GBP/USD is trading at 1.3809, down 0.14% on the day. On the release front, there are no British data releases on the schedule. The US federal budget is expected to rebound and show a large surplus of $50.2 billion. The last time the federal government posted a surplus was in September. On Tuesday, the UK releases a host of inflation indicators, led by CPI.

It was the Bank of England’s turn to be in the spotlight on Thursday. The BoE made no changes to interest rates or quantitative easing, and both moves were unanimous (9-0). There was some surprise however, at the hawkish tone of policymakers, who said that interest rates could rise “earlier” and by a “somewhat greater extent” than they predicted at their previous meeting in November. Bottom line? We could see an interest rate in the first half of 2018, with analysts circling May as the most likely date. At the same time, the effect that Brexit is having on the economy is difficult to predict, and if the economic conditions worsen, the BoE could delay a rate hike. The hawkish message from the BoE pushed the British pound above the 1.40 level, but the upward swing didn’t last, as the pound had to settle for small gains on Thursday.

It’s a quiet start to the week in the US, and the US dollar has been generally subdued. That will likely change on Wednesday, with the release of inflation and retail sales reports. The markets will be glued to the inflation indicators, as last week’s stock market slide was triggered by concern that higher inflation would lead to additional rate hikes from the Federal Reserve and other central banks. If inflation numbers are higher than expected, we could see some volatility from the US dollar as well as the stock markets.

GBP/USD Fundamentals

Monday (February 12)

  • 4:50 MPC Member Gertjan Vlieghe Speaks
  • 11:30 MPC Member McCafferty Speaks
  • 14:00 US Federal Budget Balance. Estimate 50.2B

Tuesday (February 13)

  • 4:30 British CPI. Estimate 2.9%

*All release times are GMT

*Key events are in bold

 

GBP/USD for Monday, February 12, 2018

GBP/USD February 12 at 11:30 EDT

Open: 1.3828 High: 1.3876 Low: 1.3796 Close: 1.3809

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3613 1.3744 1.3809 1.3901 1.4010 1.4128

GBP/USD posted gains in the Asian session but gave these up in European trade. The pair is steady in North American trade

  • 1.3809 was tested earlier in support and is under strong pressure. It could break in the North American session
  • 1.3901 has some breathing room in resistance following losses by GBP/USD on Friday

Current range: 1.3809 to 1.3901

Further levels in both directions:

  • Below: 1.3809, 1.3744, 1.3613
  • Above: 1.3901, 1.4010, 1.4128 and 1.4271

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing short positions with a majority (56%). This is indicative of trader bias towards GBP/USD continuing to lose ground.

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.

US Futures Higher After Second Plunge This Week

Indices Remain Vulnerable After Entering Correction

US futures are trading slightly in the green ahead of the open on Friday, a day after stock markets once again tumbled leaving indices in correction territory.

As we saw on Thursday, this isn’t necessarily indicative of calm returning to the markets. The Dow recorded declines of more than 1,000 points for the second time this week, having never done so before, despite futures prior to the open being relatively unchanged on the previous days close.

Equities Lose $5 Trillion as Bulls Slay Bulls

Clearly there remains a lot of volatility and nervousness in the markets and I don’t expect this to ease up heading into the weekend. Stock markets will likely remain vulnerable to further shocks heading into today’s close and possible even next week. That said, with a 10% correction having now completed, I wonder whether investors will now start looking to buy the dips as the fundamental backdrop remains strong.

OANDA fxTrade Advanced Charting Platform

US Congress Passes Funding Bill Ending Brief Government Shutdown

On a more positive note, the House and the Senate approved a new funding bill in the early hours of Friday morning that will see the government through to 23 March and increase spending limits for two years, ending a showdown that came into effect overnight.

Markets haven’t been too concerned about the prospect of a shutdown since the start of the year despite two having now taken place so I don’t expect to see any boost now that a deal has been reached. This is merely just another self-inflicted risk that’s been temporarily averted.

CAC Loses Ground as Global Sell-Off Continues

Sterling Dips After Worrying Manufacturing Data

It’s a slightly quieter day in terms of notable economic events. The Canadian jobs data will be of interest given that the central bank has been relatively aggressively raising interest rates over the last six months. The UK GDP estimate from NIESR will also be of interest, given that the pound has continued to rise even as the economy experiences a notable slowdown.

The manufacturing and industrial production figures from the UK this morning showed another dip in December, with the latter in particular experiencing no year on year growth. Given that these are among the areas that have benefited since the referendum, it may be a minor concern. The pound dipped after the releases having failed to hold above 1.40 against the dollar in recent days.

GBPUSD Daily Chart

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD – Pound Gains Ground as BoE Hints at Rate Increase

The British pound has posted gains in the Thursday session, erasing the losses seen on Wednesday. In North American trade, GBP/USD is trading at 1.3919, up 0.29% on the day. On the release front, the Bank of England maintained interest rates at 0.50%, but hinted at earlier and larger rate hikes. In the US, unemployment claims dropped to a sparkling 221 thousand, well below the estimate of 232 thousand.

The BoE was in the spotlight on Thursday. The Bank made no changes to interest rates or quantitative easing, and both moves were unanimous (9-0). There was some surprise however, at the hawkish tone of policymakers, who said that interest rates could rise “earlier” and by a “somewhat greater extent” than they predicted at their previous meeting in November. Bottom line? We could see an interest rate in the first half of 2018, with analysts circling May as the most likely date. At the same time, the effect that Brexit is having on the economy is difficult to predict, and if the economic conditions worsen, the BoE could delay a rate hike.

Pound jumps on ‘Hawkish’ BoE

It’s been a rough week for the pound, which is down 1.5 percent. The US dollar has posted gains against the pound and the other majors, after a massive sell-off on global stock markets on Monday. The sell-off was precipitated by strong US nonfarm payrolls and wage growth reports on Friday. This triggered concerns that higher inflation was on the way, which in turn would result in more rate hikes this year. Higher interest rates make the dollar more attractive for investors, at the expense of other currencies. If the turbulence in the stock markets continue, the pound could resume its downward movement.

 

GBP/USD Fundamentals

Thursday (February 8)

  • 7:00 BoE Inflation Report
  • 7:00 MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9
  • 7:00 BoE Monetary Policy Summary
  • 7:00 BoE Official Bank Rate. Estimate 0.50%. Actual 0.50%
  • 7:00 BoE Inflation Letter
  • 7:00 MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9
  • 7:00 British Asset Purchase Facility. Estimate 435B. Actual 435B
  • 8:30 US Unemployment Claims. Estimate 232K. Actual 221K
  • 10:00 US Mortgage Delinquencies. Actual 5.17%
  • 10:30 US Natural Gas Storage. Estimate -116B. Actual -119B
  • 13:01 US 30-year Bond Auction

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, February 8, 2018

GBP/USD February 8 at 12:20 EDT

Open: 1.3880 High: 1.4067 Low: 1.3846 Close: 1.3918

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3744 1.3809 1.3901 1.4010 1.4128 1.4271

GBP/USD ticked upwards in the Asian session. In European trade, the pair posted slight losses but reversed directions and made strong gains in European trade. In the North American session, the pair posted slight gains but has changed directions and is moving lower.

  • 1.3901 is providing support
  • 1.4010 was tested in resistance earlier on Thursday

Current range: 1.3901 to 1.4010

Further levels in both directions:

  • Below: 1.3901, 1.3809, 1.3744, 1.3613
  • Above: 1.4010, 1.4128 and 1.4271

OANDA’s Open Positions Ratio

GBP/USD ratio is showing movement towards short positions. Currently, short positions have a majority (55%), indicative of trader bias towards GBP/USD reversing directions and moving lower.

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.