Friday’s trade saw GBP/USD within the range of 1.5692-1.5748. The pair closed at 1.5720, losing 0.08% on a daily basis.
At 8:58 GMT today GBP/USD was up 0.02% for the day to trade at 1.5720. The pair touched a daily high at 1.5747 at 7:15 GMT.
Fundamentals
United Kingdom
CBI Industrial Orders
The gauge of industrial orders in the United Kingdom probably remained unchanged at a reading of 3 during the three months to December, according to expectations. This indicator reflects the net balance between companies, that registered an increase in industrial orders during the respective period of three months and those, that registered a drop. It is the oldest indicator, released from the UK private sector, to show the development tendency in country’s industrial sector. The Industrial Trends Survey by the Confederation of British Industry (CBI) provides expert qualitative opinion from senior manufacturing executives, on past and expected trends in output, exports, prices, costs, investment intentions, business confidence and capacity utilization. A level above zero suggests that volume of orders is projected to increase, while a level below zero indicates that expectations point to lower volumes. If the survey showed predominant optimism, this would have a bullish effect on the sterling. The CBI will announce the results from its survey, encompassing 17 industries, at 11:00 GMT.
United States
New York Empire States Manufacturing data
The New York Empire State Manufacturing Index probably improved to a reading of 12.00 in December, according to the median forecast by experts, from 10.16 in the prior month. If so, this would be the highest index reading since September, when the indicator was reported at 27.54.
The index is based on the monthly Empire State Manufacturing Survey, which is conducted by the Federal Reserve Bank of New York. About 200 top manufacturing executives respond to a questionnaire, sent out during the first day of the month. They provide their estimates in regard to the performance of several business indicators from the prior month, while also forecasting performance during the upcoming six months.
The ”general business conditions” component of the index is based on a distinct question, posed on the Empire State Manufacturing Survey, which means it is not a weighted average of the other indicators. These indicators, which are only applicable to the manufacturing facilities of survey respondents in the region of New York, include new orders, shipments, unfilled orders, delivery time, inventories, prices paid, prices received, number of employees including contract workers, average employee work week, technology spending and capital expenditures.
The general business conditions component and the sub-indexes for the 11 indicators are calculated by subtracting the percentage of respondents, rating an indicator as ”lower” (a drop), from the percentage of respondents, rating the same indicator as ”higher” (an increase). In case 33% of survey respondents stated that business conditions had improved during the current month, 50% stated that conditions had not changed, and 17% of the respondents stated that conditions had deteriorated, the index would have a reading of 16. Readings above 0.00 are indicative of improving business conditions in the region. Higher-than-anticipated index value would certainly boost demand for the US dollar. The Federal Reserve Bank of New York is expected to release the official reading at 13:30 GMT on Monday.
Industrial output, Capacity Utilization Rate
Industrial output in the United States probably expanded 0.6% in November compared to October, following a 0.1% contraction in October compared to September. Manufacturing production expanded 0.2% in October, as the production of non-durable goods increased 0.3%, while the production of durable goods edged up 0.1%. Mining output declined 0.9%, while utilities output shrank 0.7% during the same month.
The index of industrial production reflects the change in overall inflation-adjusted value of output in the three major sectors mentioned above. The index is sensitive to consumer demand and interest rates. As such, industrial production is an important tool for future GDP and economic performance forecasts. Those figures are also used to measure inflation by central banks as very high levels of industrial production may lead to uncontrolled levels of consumption and rapid inflation. It is a coincident indicator, which means that changes in its levels generally echo similar shifts in overall economic activity. A larger-than-projected increase in the index would usually boost demand for the US dollar.
The Board of Governors of the Federal Reserve is to release the production data at 14:15 GMT.
In addition, Capacity Utilization Rate in the country probably rose to 79.3% in November from 78.9 in October. If so, this would be the highest utilization rate since March. This indicator represents the optimal rate for a stable production process, or the highest possible level of production in an enterprise, in case it operates within a realistic work schedule and has sufficient raw materials and inventories at its disposal. High rates of capacity utilization usually lead to inflationary pressure. In general, higher-than-anticipated rates tend to be dollar positive.
NAHB Housing Market Index
The National Association of Home Builders (NAHB) Housing Market Index probably slipped to a reading of 57.0 in December, according to expectations, from 58.0 in November. The latter has been the highest index reading since September, when the indicator stood at 59.0. It is based on a monthly survey in regard to current home sales and expected sales in the coming six months. Values above the key level of 50.0 indicate that housing market conditions are good. Therefore, higher-than-projected readings would provide support to the greenback. The official data is scheduled for release at 15:00 GMT.
No rate hike in 2015?
The 2008 Nobel laureate Paul Krugman said that it is unlikely that Fed policy makers will raise borrowing costs in 2015, as they are attempting to boost inflation rate in the conditions of a sluggish global growth.
“When push comes to shove they’re going to look and say: ‘It’s a pretty weak world economy out there, we don’t see any inflation, and the risk if we raise rates and it turns out we were mistaken is just so huge’,” Krugman said in Dubai, cited by Bloomberg. “It’s certainly a real possibility that they’ll go ahead and do it, but probably not, and for what it’s worth I and others are trying to bully them into not doing it.”
Paul Krugman also stressed that financial markets are providing indications that policy makers will postpone a rate hike. At the same time, Federal Reserve officials and experts in a survey by the same media project higher interest rates in the United States next year.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.5720. In case GBP/USD manages to breach the first resistance level at 1.5748, it will probably continue up to test 1.5776. In case the second key resistance is broken, the pair will probably attempt to advance to 1.5804.
If GBP/USD manages to breach the first key support at 1.5692, it will probably continue to slide and test 1.5664. With this second key support broken, the movement to the downside will probably continue to 1.5636.
The mid-Pivot levels for Monday are as follows: M1 – 1.5650, M2 – 1.5678, M3 – 1.5706, M4 – 1.5734, M5 – 1.5762, M6 – 1.5790.
In weekly terms, the central pivot point is at 1.5672. The three key resistance levels are as follows: R1 – 1.5806, R2 – 1.5891, R3 – 1.6025. The three key support levels are: S1 – 1.5587, S2 – 1.5453, S3 – 1.5368.
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