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GBP/USD - Pound Rises Despite Soft British Data
Pound/dollar characteristics:
GBP/USD is a major pair and certainly one of the first to emerge in modern trade. Its nickname “cable” originates from transmitting the exchange rate over the telegraph cable between the UK and the USA in the 19th century.
Above average volatility characterizes pound/greenback trading. In comparison to other major pairs, stop-loss orders are usually placed at wider margins.
Another tidbit of Sterling trading is that the pair “front-runs” economic publications from Great Britain. We usually see a significant market movement ahead of a release. Leaks, rumors, or sheer nervousness move GBP USD
The pound is a moderate “risk” currency. When the global mood is positive, GBP often gains against the dollar, albeit usually not at the same magnitude as commodity currencies. When markets become risk-averse, Sterling is on the retreat.
The swings continue for GBP/USD. The pair gained 1.0% last week, erasing most of the losses seen in the previous week. The upcoming week has just two events. Here is an outlook for the highlights of the upcoming week and an updated technical analysis for GBP/USD.
British GDP declined by 0.1% for a second straight month in September. Despite this weak reading, second-quarter GDP posted a gain of 0.3%, just shy of the forecast of 0.4%. Employment numbers were weaker than expected, as wage growth dipped to 3.6% and unemployment rolls jumped to 33.0 thousand. CPI slipped to 1.5%, its lowest level since November 2018. Finally, retail sales declined by 0.1% in October, shy of the forecast of 0.2%.
In the U.S., last week’s highlights were consumer inflation and spending reports. CPI improved to 0.4%, above the estimate of 0.3%. This was the strongest monthly gain since March. The core reading ticked higher to 0.2%, up from 0.1%. This matched the estimate. Retail sales reports were mixed. Retail sales rebounded with a gain of 0.3%, up from -0.3% a month earlier. This beat the estimate of 0.1%. The core reading improved to 0.2%, up from -0.1%. However, it missed the forecast of 0.3%.
GBP/USD Technical analysis:
Technical lines from top to bottom:
We start with resistance at 1.31505 Close by, there is resistance at 1.30565
1.2850 has switched to a support role after sharp gains by GBP/USD.
I am neutral on GBP/USD
After posting gains of more than 5% in October, the pound has been swinging in both directions in November. There is plenty of uncertainty in the air, with Brits going to the polls in December and the Brexit saga still unresolved.
Brexit talks and GBP/USD:
The biggest market mover of GBP/USD is the surprising decision of voters in the United Kingdom to leave the European Union. This unprecedented move shook up Her Majesty’s currency. Brexit has sent Pound/USD to levels last seen in 1985 and despite the recovery, Sterling still suffers.
The economy did well in 2016, before and after the EU Referendum, but it slowed down in 2017. On the other hand, the weak pound pushed inflation above the rises in wages. The Bank of England decided to raise rates in November 2017 but clarified it is a one-off. Mark Carney and his colleagues foresee only two hikes in the next three years.
Brexit negotiations were deadlocked for quite some time, but fresh hopes help the pound stabilize. PM Theresa May may agree to pay the high “divorce bill” that the EU demands.
Pound/dollar characteristics:
GBP/USD is a major pair and certainly one of the first to emerge in modern trade. Its nickname “cable” originates from transmitting the exchange rate over the telegraph cable between the UK and the USA in the 19th century.
Above average volatility characterizes pound/greenback trading. In comparison to other major pairs, stop-loss orders are usually placed at wider margins.
Another tidbit of Sterling trading is that the pair “front-runs” economic publications from Great Britain. We usually see a significant market movement ahead of a release. Leaks, rumors, or sheer nervousness move GBP USD
The pound is a moderate “risk” currency. When the global mood is positive, GBP often gains against the dollar, albeit usually not at the same magnitude as commodity currencies. When markets become risk-averse, Sterling is on the retreat.
The swings continue for GBP/USD. The pair gained 1.0% last week, erasing most of the losses seen in the previous week. The upcoming week has just two events. Here is an outlook for the highlights of the upcoming week and an updated technical analysis for GBP/USD.
British GDP declined by 0.1% for a second straight month in September. Despite this weak reading, second-quarter GDP posted a gain of 0.3%, just shy of the forecast of 0.4%. Employment numbers were weaker than expected, as wage growth dipped to 3.6% and unemployment rolls jumped to 33.0 thousand. CPI slipped to 1.5%, its lowest level since November 2018. Finally, retail sales declined by 0.1% in October, shy of the forecast of 0.2%.
In the U.S., last week’s highlights were consumer inflation and spending reports. CPI improved to 0.4%, above the estimate of 0.3%. This was the strongest monthly gain since March. The core reading ticked higher to 0.2%, up from 0.1%. This matched the estimate. Retail sales reports were mixed. Retail sales rebounded with a gain of 0.3%, up from -0.3% a month earlier. This beat the estimate of 0.1%. The core reading improved to 0.2%, up from -0.1%. However, it missed the forecast of 0.3%.
GBP/USD Technical analysis:
Technical lines from top to bottom:
We start with resistance at 1.31505 Close by, there is resistance at 1.30565
1.2850 has switched to a support role after sharp gains by GBP/USD.
I am neutral on GBP/USD
After posting gains of more than 5% in October, the pound has been swinging in both directions in November. There is plenty of uncertainty in the air, with Brits going to the polls in December and the Brexit saga still unresolved.
Brexit talks and GBP/USD:
The biggest market mover of GBP/USD is the surprising decision of voters in the United Kingdom to leave the European Union. This unprecedented move shook up Her Majesty’s currency. Brexit has sent Pound/USD to levels last seen in 1985 and despite the recovery, Sterling still suffers.
The economy did well in 2016, before and after the EU Referendum, but it slowed down in 2017. On the other hand, the weak pound pushed inflation above the rises in wages. The Bank of England decided to raise rates in November 2017 but clarified it is a one-off. Mark Carney and his colleagues foresee only two hikes in the next three years.
Brexit negotiations were deadlocked for quite some time, but fresh hopes help the pound stabilize. PM Theresa May may agree to pay the high “divorce bill” that the EU demands.
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