Yesterday’s trade saw GBP/USD within the range of 1.4395-1.4487. The pair closed at 1.4435, inching down 0.04% on a daily basis. It has been the 18th drop in the past 34 trading days. The daily high has been the highest level since May 6th, when a high of 1.4544 was registered. The major pair has extended its slump to 1.18% so far during the current month, following two consecutive months of advance.
At 6:15 GMT today GBP/USD was inching up 0.06% on the day to trade at 1.4443. The pair touched a daily high at 1.4453 during the early phase of the Asian trading session, overshooting the daily R2 level, and a daily low at 1.4432 at 6:01 GMT.
On Thursday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United Kingdom
Bank of England decision on policy
At 11:00 GMT Bank of England is to announce its decision on monetary policy. The benchmark interest rate (repo rate) will probably be left unchanged at the record low level of 0.50%. The rate has been at that level since BoEs policy meeting on March 5th 2009. The repo rate applies to open market operations of the central bank with other banks, building societies, securities firms etc.
At the same time, the pace of BoE’s monetary stimulus will probably be left without change as well, at GBP 375 billion. The asset-purchasing program, financed by the issuance of central bank reserves was initiated on March 5th 2009, while the scale of this program was increased by GBP 50 billion to the current GBP 375 billion on July 5th 2012.
The minutes from the Banks policy meeting held in March revealed that all 9 members of the Monetary Policy Committee voted in favor of keeping borrowing costs and the stock of purchased assets intact. One member of the Committee has been voting in favor of a rate hike since the summer of 2015, but abandoned such a stance, due to revised down economic growth and inflation forecasts. Policy makers noted that the uncertainty over the outcome from the referendum on EU membership had begun to adversely affect growth.
According to extracts from the Minutes of the Banks most recent policy meeting, released on April 13th: ”Developments over the past month had done little to change the broad outlook for activity and inflation.Downside risks around near-term Chinese growth had lessened, following the authorities’ announcement of plans to target only a modest slowing in demand in 2016 and some supportive activity indicators – although the achievement of a smooth rebalancing of the Chinese economy would remain a challenge.”
”There had been signs that uncertainty relating to the EU referendum had begun to weigh on certain areas of activity. Media references to uncertainty had jumped, though the impact of this on household spending was unclear.”
”The Committee noted that referendum effects were likely to make macroeconomic and financial market indicators harder to interpret over the next few months. As a result, the Committee was likely to react more cautiously to data news over this period than would normally be the case.”
”The Committee considered the likely implications for monetary policy of a vote to leave the European Union. Such a vote might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth. This uncertainty would be likely to push down on demand in the short run. Uncertainty regarding the supply side of the economy might also increase, reflecting any alterations to product or labour market regulation, adjustments in labour flows or changes in the rate of technology adoption as a result of different arrangements governing foreign trade and capital flows.”
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 May 6th, probably fell to 270 000, according to market consensus, from 274 000 in the preceding week. The latter has been the highest number of claims since the business week ended on March 25th, when 276 000 claims were reported.
The 4-week moving average, an indicator lacking seasonal effects, was 258 000, marking an increase by 2 000 compared to the preceding weeks unrevised average.
The business week, which ended on April 29th has been the 61st consecutive week, when jobless claims stood below the 300 000 threshold, which suggested a healthy labor market. It has been the longest streak in almost 43 years.
Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or decreased further, this would have a moderate bullish effect on the US dollar.
The number of continuing jobless claims probably fell to the seasonally adjusted 2 120 000 during the business week ended on April 29th, according to the median forecast by experts, from 2 121 000 in the preceding week. The latter has been the lowest level since November 4th 2000, when 2 110 000 claims were reported. The figure also represented a decrease by 8 000 compared to the unrevised number of claims reported in the week ended on April 15th. 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 US Department of Labor is to release the weekly report at 12:30 GMT.
Import, Export Prices
Prices of imported goods in the United States probably rose for a second consecutive month in April, going up at a monthly rate of 0.5%, according to market expectations. In March import prices were 0.2% higher from a month ago, as imported fuel prices went up 4.9%, while non-fuel prices (consumer goods, foods and beverages, feeds, capital goods) edged down 0.1%. In annual terms, import prices were 6.2% lower in March, which has been the 20th consecutive month of decline. Generally, higher import prices of goods suggest higher rates of consumer inflation.
Prices of exported goods from the United States probably increased 0.1% in April, according to expectations. In March export prices remained unchanged from a month ago, as non-agricultural export prices rose 0.3%, supported by industrial supplies and materials, while agricultural export prices went down 2.5%, dragged down by prices of fruits, soybeans, corn and nuts. In annual terms, export prices slumped 6.1% in March, or for a 19th month in a row. Lower prices of exported goods generally bolster demand abroad, and as US trade accounts for 20% of international trade relations, this also tends to be dollar positive.
The Department of Labor is expected to release the official numbers at 12:30 GMT.
Fed Speakers
At 15:30 GMT the Federal Reserve President for Boston, Eric Rosengren, is expected to take a statement, followed by the Fed President for Kansas and also a FOMC member, Esther George, at 17:30 GMT. Their remarks may trigger a limited-to-moderate volatility of the currency pairs, containing the US dollar.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.4443
R2 – 1.4452
R3 (range resistance) – 1.4460
R4 (range breakout) – 1.4486
S1 – 1.4427
S2 – 1.4418
S3 (range support) – 1.4410
S4 (range breakout) – 1.4384
By using the traditional method of calculation again, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.4538
R1 – 1.4661
R2 – 1.4892
R3 – 1.5015
S1 – 1.4307
S2 – 1.4184
S3 – 1.3953
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