Yesterday’s trade saw GBP/USD within the range of 1.5245-1.5347. The pair closed at 1.5261, falling 0.23% on a daily basis, while extending losses from Tuesday. The daily low has been the lowest level since October 14th, when the pair registered a low of 1.5244.
The dollar was largely supported on Wednesday, as the Federal Reserve kept borrowing costs on hold, but left the door open for a hike in December, citing sound gains in US household spending and investment. Policymakers dropped prior warnings in regard to the risks global financial and economic developments were posing to economic activity in the United States.
At 7:54 GMT today GBP/USD was gaining 0.02% for the day to trade at 1.5269. The pair touched a daily high at 1.5275 at 7:40 GMT.
Today GBP/USD trading may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
United Kingdom
Consumer credit, Mortgage approvals
Lending to consumers in the United Kingdom probably expanded to GBP 1.100 billion in September from GBP 0.860 billion in August. The latter has been the lowest amount borrowed by individuals since February 2015, when a figure of GBP 0.740 billion was reported. This indicator represents borrowing by the UK personal sector (individuals only) to fund current expenditures on goods and services, which are a driving force behind economic growth. Within a booming economy, excessively high levels of consumer lending may be taken as an indication that economy itself is set to overheat. It is so, because individuals tend to borrow money in order to live beyond their means. Within a sluggish economy, however, in case lending to individuals expanded more than projected, this would usually have a moderate bullish effect on the sterling. Bank of England (BoE) is to release the official numbers at 9:30 GMT.
At the same time, the number of mortgage approvals in the United Kingdom probably rose for a fourth consecutive month in September to reach 72 500, according to experts’ expectations. If so, it would be the highest number of mortgages approved since January 2014, when a figure of 76 753 was reported. In August there were 71 030 mortgages approved. Mortgage approvals are considered as a leading indicator, reflecting the health of the country’s housing market. In case the number of mortgage approvals increased more than anticipated, this would imply potentially higher demand in the nations housing sector and, respectively, a positive impulse for overall economy. Therefore, the national currency would also be supported. Bank of England will release the official data at 9:30 GMT.
United States
Initial, Continuing Jobless Claims
The number of people in the United States, who filed for unemployment assistance for the first time during the business week ended on October 23rd, probably increased to 262 000, according to market expectations, from 259 000 in the previous week.
The 4-week moving average, an indicator lacking seasonal effects, was 263 250, marking a decrease of 2 000 compared to the preceding weeks revised up average. It has been the lowest level for this average since December 15th 1973, when 256 750 claims were reported.
The business week, which ended on October 16th has been the 33rd consecutive week, when jobless claims stood below the 300 000 threshold.
Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or increased further, this would have a moderate bearish effect on the US dollar.
The number of continuing jobless claims probably decreased to the seasonally adjusted 2 160 000 during the business week ended on October 16th, from 2 170 000 in the prior week. The latter represented an increase by 6 000 compared to the revised up number of claims reported in the week ended on October 2nd. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago.
The Department of Labor is to release the weekly report at 12:30 GMT.
Gross Domestic Product – preliminary estimate
The preliminary estimate of the US Gross Domestic Product probably pointed to an annualized rate of growth of 1.6% in the third quarter of the year, according to expectations. The final GDP estimate for Q2, reported on September 25th, pointed to an annual growth of 3.9%, a revision up compared to the preliminary and the second GDP estimates. It has also been the fastest annual rate of growth since Q3 2014, when US economy expanded at a final rate of 5.0%.
Consumer spending in the country rose 3.6% year-on-year in the second quarter of 2015, up from a 3.1% expansion in the second estimate, and following a 1.8% increase in the previous quarter.
Housing investment was up 9.3% year-on-year in Q2, up from a 7.8% increase in the second esimate, and following a 10.1% increase in the first quarter of the year.
Business investment expanded at an annualized rate of 4.1% in Q2, accelerating from a 3.2% increase in the second estimate, and following a 1.6% expansion in the first quarter.
Government purchases were up 2.6% year-on-year in Q2, or in line with the second estimate and rebounding from a 0.1% drop in the preceding quarter.
US exports rose at an annualized rate of 5.1% in Q2, slowing down from a 5.2% growth in the second estimate, while following a 6.0% slump in Q1. US imports climbed 3.0% year-on-year in the second quarter, also slowing down from a 2.8% increase in the second estimate and down from a 7.1% gain in the first quarter, according to data by the US Department of Commerce.
In case a slower-than-projected rate of growth is reported in Q3, this would have a substantial bearish effect on the US dollar. The preliminary GDP report is due out at 12:30 GMT.
Pending Home Sales
The index of pending home sales in the United States probably rose 1.0% in September compared to August, according to the median estimate by experts, following a 1.4% slump in the prior month. If so, this would be the sharpest monthly rate of increase since April 2015, when pending home sales went up 3.4%.
In annual terms, the index of pending home sales rose 6.1% in August, or at the slowest pace since December 2014, when a climb rate of 6.1% was reported as well.
When a sales contract is accepted for a property, it is recorded as a pending home sale. As an indicator the index provides information on the number of future home sales, which are in the pipeline. It gathers data from real estate agents and brokers at the point of a sale and is currently the most accurate indicator regarding the US housing sector. It samples over 20% of the market. In addition, over 80% of pending house sales are converted to actual home sales within 2 or 3 months. Therefore, this index has a predictive value about actual home sales.
In case pending home sales increased more than anticipated, this would have a moderate bullish effect on the greenback. The National Association of Realtor’s (NAR) will release the official index value at 14:00 GMT.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.584% on October 28th, or the highest level since October 26th (0.608%), after which it closed at 0.550% to add 2.4 basis points (0.024 percentage point) compared to October 27th. It has been the first gain in the past three trading days.
The yield on US 2-year government bonds climbed as high as 0.723% on October 28th, or the highest level since September 25th (0.743%), after which it closed at 0.715% to add 9.4 basis points (0.094 percentage point) compared to October 27th. It has been the first gain in the past three trading days.
The spread between 2-year US and 2-year UK bond yields widened to 0.165% on October 28th from 0.095% on October 27th. The October 28th yield spread has been the largest one since September 15th, when the difference was 0.166%.
Meanwhile, the yield on UK 10-year government bonds soared as high as 1.826% on October 28th, after which it slid to 1.803% at the close to add 3.9 basis points (0.039 percentage point) compared to October 27th. It has been the first increase in the past three trading days.
The yield on US 10-year government bonds climbed as high as 2.108% on October 28th, or the highest level since October 9th (2.138%), after which it slipped to 2.092% at the close to add 5.5 basis points (0.055 percentage point) compared to October 27th. It has been the first gain in the past three trading days.
The spread between 10-year US and 10-year UK bond yields widened to 0.289% on October 28th from 0.273% on October 27th. The October 28th yield difference has been the largest one since October 2nd, when the spread was 0.289%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.5270
R2 – 1.5280
R3 (range resistance) – 1.5289
R4 (range breakout) – 1.5317
S1 – 1.5252
S2 – 1.5242
S3 (range support) – 1.5233
S4 (range breakout) – 1.5205
By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.5374
R1 – 1.5447
R2 – 1.5579
R3 – 1.5652
S1 – 1.5242
S2 – 1.5169
S3 – 1.5037
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