Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.3128-1.3318. The pair closed at 1.3268, soaring 0.98% compared to Wednesdays close. It has been the 150th gain in the past 329 trading days, a second consecutive one and also the steepest one since August 16th. The daily high has been a level unseen since August 4th, when a high of 1.3347 was registered. The major pair has appreciated 0.98% so far during the current month, after losing 0.72% of its value in August.
At 7:14 GMT today GBP/USD was inching up 0.01% on the day to trade at 1.3269. The pair touched a daily high at 1.3295 during the late phase of the Asian trading session, overshooting the daily R1 level, and a daily low at 1.3265 during early European trade.
On Friday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United Kingdom
Construction PMI by Markit/CIPS
Activity in United Kingdom’s sector of construction probably shrank for a third consecutive month in August, with the corresponding Purchasing Managers’ Index coming in at a reading of 46.1, according to market expectations. In July the index stood at 45.9, which has been a level unseen since June 2009, as the overall uncertainty following the EU membership referendum strongly influenced business activity, especially in the commercial building segment. The sub-gauge of employment tumbled below the 50.0 level for the first time since May 2013 and the sub-index of new orders fell at a lesser rate in July compared to the 3.5-year low reported in June.
The index is based on a survey, encompassing managers of companies, operating in the construction sector. They are asked about their estimate regarding current business conditions (new orders, output, employment, demand in the future). Values below the key level of 50.0 signify predominant pessimism in regard to business conditions. In case the PMI met expectations or improved more in August, this would have a limited-to-moderate bullish effect on the Sterling. The Chartered Institute of Purchasing and Supply (CIPS) is to release the official index reading at 8:30 GMT.
United States
Balance of Trade
The deficit on US balance of trade probably narrowed to USD 42.70 billion in July, according to market expectations, from a deficit figure of USD 44.50 billion in June. The latter has been the highest trade gap since February, as total imports soared 1.9%, driven by higher prices of oil and stronger domestic demand, while total exports went up 0.3%.
In case the trade balance deficit shrank more than anticipated in July, this would have a strong bullish effect on the US dollar, because of the positive implications in regard to economic growth. The Bureau of Economic Analysis will release the official trade data at 12:30 GMT.
Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings
Employers in all sectors of economy in the United States, excluding the farming industry, probably added 180 000 new jobs in August, according to the median forecast by experts, after a job gain of 255 000 in July. June’s figure has been revised up to 292 000 from 287 000 reported previously.
Employment in leisure and hospitality rose by 45 000 in July, in health care and social assistance – by 43 000, in professional and business services – by 70 000, in food services and drinking places – by 21 000, in financial activities – by 18 000 and in the governmental sector – by 38 000. On the other hand, the US mining industry lost 6 000 jobs in July.
Total non-farm payrolls account for 80% of the workers, who produce the entire Gross Domestic Product of the United States. In case of a higher-than-expected gain in jobs in August, demand for the US dollar would be strongly supported.
Average Hourly Earnings probably increased 0.2% in August compared to the prior month, according to market expectations, following a 0.3% gain in July. If expectations were met, August would be the sixth consecutive month of earnings increase.
Meanwhile, the rate of unemployment in the country probably decreased to 4.8% in August, according to market expectations, from 4.9% in June and July.
The total number of people unemployed remained almost unchanged at 7.8 million in July. Among major groups, the unemployment rates for adult men (4.6%), adult women (4.3%), teenagers (15.6%), Whites, (4.3%), Blacks (8.4%), Asians (3.8%), and Hispanics (5.4%) changed little or not at all.
The number of long-term unemployed (those looking for employment for 27 weeks or more) remained almost unchanged at 2.0 million during July and comprised 26.6% of the unemployed, according to the BLS. At the same time, the number of persons in part-time employment for economic reasons (involuntary part-time workers) was little changed as well at 5.9 million in July.
In case the unemployment rate met expectations or even fell further, this would have a bullish effect on the US Dollar, because of the positive implications for consumer spending. The Bureau of Labor Statistics will release the official employment data at 12:30 GMT.
Factory Orders
The total value of factory orders in the United States probably rebounded in July after two months of decline, going up at a monthly rate of 2.0%, according to the median estimate by experts. If so, this would be the largest monthly increase since June 2015, when a revised up 2.2% growth was recorded.
In June, there has been an unrevised 1.5% drop mainly due to weak demand for transportation equipment and capital goods. During the same month, orders for non-defense capital goods excluding aircraft, an indicator of business confidence and spending plans, surged 0.4%, while extending the 0.2% gain reported in the previous period.
Excluding the sector of transportation, factory orders went up 0.4% in June from a month ago, while marking a fourth successive period of growth.
The general index reflects the total value of new purchase orders, placed at manufacturers for durable and non-durable goods, and can provide insight into inflation and growth in the US sector of manufacturing. In case the general index of new orders surged at a faster-than-anticipated rate in July, this would trigger a moderate bullish impulse for the US dollar, as it implies future growth acceleration. The US Census Bureau will release the official report at 14:00 GMT.
Fed’s Lacker statement
At 17:00 GMT the Fed President for Richmond and also a FOMC member, Jeffrey Lacker, is expected to take a statement. Any remarks in regard to the central bank’s policy stance or the US economic outlook would heighten USD volatility.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.177% on September 1st, after which it closed at 0.139% to lose 1.5 basis points (0.015 percentage point) compared to August 31st.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.821% on September 1st, after which it fell to 0.789% at the close to lose 2 basis points (0.02 percentage point) compared to August 31st.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.650% on September 1st from 0.655% on August 31st. The September 1st yield spread has been the lowest one since August 29th, when the difference was 0.641%.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the daily levels of importance for GBP/USD are presented as follows:
R1 – 1.3285
R2 – 1.3303
R3 (Range Resistance – Sell) – 1.3320
R4 (Long Breakout) – 1.3373
R5 (Breakout Target 1) – 1.3434
R6 (Breakout Target 2) – 1.3460
S1 – 1.3251
S2 – 1.3233
S3 (Range Support – Buy) – 1.3216
S4 (Short Breakout) – 1.3164
S5 (Breakout Target 1) – 1.3102
S6 (Breakout Target 2) – 1.3076
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.3150
R1 – 1.3267
R2 – 1.3395
R3 – 1.3512
R4 – 1.3628
S1 – 1.3022
S2 – 1.2905
S3 – 1.2777
S4 – 1.2648
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.3126
R1 – 1.3387
R2 – 1.3634
R3 – 1.3895
R4 – 1.4155
S1 – 1.2879
S2 – 1.2618
S3 – 1.2371
S4 – 1.2123
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