Yesterday’s trade saw GBP/USD within the range of 1.2797-1.3028. The pair closed at 1.2931, losing 0.71% compared to Tuesdays close. It has been the 157th drop in the past 288 trading days and also a second consecutive one. The daily low has been the lowest level since July 1985. The major pair has fallen 2.49% so far during the current month, after depreciating 7.94% in June.
At 6:45 GMT today GBP/USD was edging up 0.25% on the day to trade at 1.2963. The pair touched a daily high at 1.2999 during the late phase of the Asian trading session, overshooting the range resistance level (R3), and a daily low at 1.2877 during early Asian trade.
On Thursday GBP/USD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United Kingdom
Industrial, Manufacturing Production
Annualized industrial production in the United Kingdom probably expanded for a second consecutive month in May, according to market expectations, at a pace of 0.5%. In April the index of industrial output rose 1.6% year-on-year, or at the steepest rate since October 2015. In monthly terms, industrial production probably shrank 1.0% in May, according to expectations, following a 2.0% expansion in April. The latter has been the sharpest monthly increase since July 2012, when output rose at a revised down 2.8%. Within the index, the largest increase was observed for manufacturing production (pharmaceuticals) during the month, or 2.3%. The index of industrial output measures the change in the total inflation-adjusted value of production in sectors such as manufacturing, mining and utilities. Consistent rates of increase in industrial production suggest inflation pressure build-up.
United Kingdom’s annualized manufacturing production, an indicator which accounts for almost 80% of the nation’s industrial output, probably expanded 0.7% in May, according to the median forecast by analysts. If so, this would be the second consecutive month of expansion. In April manufacturing output rose at an annualized rate of 0.8%, while marking the first increase in 10 months. In monthly terms, manufacturing production probably contracted 1.0% in May, according to the median estimate by experts, following a 2.3% expansion in April, or the largest since July 2012. As it is a key component of the country’s Gross Domestic Product, in case annual manufacturing production rose more than projected, this would have a moderate bullish effect on the Pound. The Office for National Statistics (ONS) will release the official industrial report at 8:30 GMT.
GDP Estimate by the NIESR
At 14:00 GMT the National Institute of Economic and Social Research (NIESR) will release its estimate in regard to UK Gross Domestic Product over the three months to June. During the three-month period to May the NIESR estimate pointed to a 0.5% GDP growth, or the highest projection since the three-month period to December 2015 (+0.6%). The report is considered as highly reliable and usually heightens volatility of the pairs containing the Pound.
United States
Employment Change by ADP
Employers in the US non-farm private sector probably added 160 000 new jobs during June, according to the median estimate by experts, following 173 000 new positions added in May.
Employment in the goods-producing sector dropped by 1 000, while employment in services increased by 175 000 in May. Construction and financial activities added 13 000 job positions each, trade/transportation/utilities – 28 000, while professional/business activities – 43 000. On the other hand, employment in manufacturing decreased 3 000.
The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of the governments employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind the US economic growth. In case new jobs growth outpaced expectations, this would have a moderate-to-strong bullish effect on the US dollar. The official figure is scheduled to be released at 12:15 GMT.
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 July 1st, probably rose to 270 000, according to market consensus, from 268 000 in the preceding week.
The 4-week moving average, an indicator lacking seasonal effects, was 266 750, marking no change compared to the preceding weeks revised down average.
The business week, which ended on June 24th has been the 69th consecutive week, when jobless claims stood below the 300 000 threshold, which suggested a healthy labor market. It has been the longest streak in 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 increased further, this would have a moderate bearish effect on the US dollar.
The number of continuing jobless claims probably dropped to the seasonally adjusted 2 113 000 during the business week ended on June 24th, according to the median forecast by experts, from 2 120 000 in the preceding week. The latter represented a drop by 20 000 compared to the revised down number of claims reported in the week ended on June 10th. 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.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.182% on July 6th, after which it closed at 0.145% to add 2.2 basis points (0.022 percentage point) compared to July 5th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.589% on July 6th, after which it fell to 0.581% at the close to add 2.7 basis points (0.027 percentage point) compared to July 5th.
The spread between 2-year UK and 2-year US bond yields, which reflects the flow of funds in a short term, widened to 0.436% on July 6th from 0.431% on July 5th. The July 6th yield spread has been the highest one since July 4th, when the difference was 0.441%.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.2952
R2 – 1.2973
R3 (range resistance) – 1.2996
R4 (range breakout) – 1.3058
S1 – 1.2910
S2 – 1.2889
S3 (range support) – 1.2867
S4 (range breakout) – 1.2804
By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.3316
R1 – 1.3514
R2 – 1.3762
R3 – 1.3960
S1 – 1.3068
S2 – 1.2870
S3 – 1.2622
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.3818
R1 – 1.4510
R2 – 1.5710
R3 – 1.6402
S1 – 1.2618
S2 – 1.1926
S3 – 1.0726
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