Friday’s trade (in GMT terms) saw GBP/USD within the range of 1.2114-1.2214. The pair closed at 1.2190, edging up 0.23% compared to Thursdays close. It has been the 170th gain in the past 370 trading days. In weekly terms, GBP/USD lost 0.34% of its value during the past week. It has been the 23rd drop in the past 43 weeks. The major pair has trimmed its slump to 6.07% so far during the current month, after losing 1.23% in September.
At 8:13 GMT today GBP/USD was inching down 0.01% on the day to trade at 1.2189. The pair touched a daily high at 1.2217 during the early phase of the Asian trading session, undershooting the range resistance level (R3), and a daily low at 1.2171 during early European trade.
On Monday GBP/USD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United Kingdom
Consumer Lending, Mortgage Approvals
Lending to consumers in the United Kingdom probably expanded by GBP 1.500 billion in September, according to the median forecast by experts, following an increase by GBP 1.574 billion in August. Credit card lending rose by GBP 0.4 billion in August, or matching the average increase in the preceding six months. Other loans expanded by GBP 1.2 billion in August, while being also in line with the average rate of increase in the prior six months.
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 sluggish economy, in case lending to individuals expanded at a faster-than-projected pace, this would usually have a moderate bullish effect on the local currency, and vice versa.
At the same time, the number of mortgage approvals in the United Kingdom probably increased to 61 500 in September, according to experts’ expectations, from 60 058 in August. The latter has been the lowest figure since November 2014, when the revised down 58 960 mortgages approved were reported (59 030 previously). Mortgage approvals are considered as a leading indicator, reflecting the health of the country’s housing market. In case the number of mortgages approved rose more than anticipated, this would imply potentially higher demand in the nation’s housing sector and, respectively, a somewhat positive impulse for overall economy. Therefore, it may have a limited-to-moderate bullish effect on the Sterling. Bank of England will release the official numbers at 9:30 GMT.
United States
Personal Income, Personal Spending and PCE Inflation
Personal spending in the United States probably grew 0.4% in September, according to market expectations, while personal income was probably up for an 18th consecutive month in September, increasing at a monthly rate of 0.4%.
Consumer spending, which accounts for over two thirds of the nation’s GDP, remained unchanged in August from a month ago, following a revised up 0.4% gain in July. August’s performance came as a result of lower spending on durable and non-durable goods, while spending on services went up.
At the same time, personal income increased 0.2% in August, decelerating from a 0.4% surge in the prior month. August’s increase has been the smallest since February, as wages and salaries grew 0.1%, after rising 0.5% in July.
Higher-than-expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 12:30 GMT.
At the same time, the Core PCE Price Index, the preferred measure of inflation by the Federal Reserve, probably rose 1.6% year-on-year in September, according to expectations. Annualized PCE inflation was at 1.7% in August, or the highest since February. On a monthly basis, the Core PCE Price Index probably increased for a ninth consecutive month in September, going up 0.1%, according to analyst projections.
Chicago manufacturing activity barometer
The Chicago Purchasing Managers’ Index (PMI) probably decelerated to a reading of 54.0 in October, according to market expectations, from 54.2 during the prior month. If so, October would be the fifth consecutive month of activity expansion in the region. In September, the gauge of production rose sharply to its highest level since January 2016, while the sub-indexes of new orders and order backlogs remained little changed. The sub-gauge of employment, on the other hand, dropped during the same month.
The index reflects business conditions in Chicago’s manufacturing sector and is interrelated with the Manufacturing Index, published by the Institute for Supply Management (ISM). A reading above the key level of 50.0 is indicative of optimism (expansion in manufacturing activity). In case the PMI slowed down more than forecast, this would have a moderate bearish effect on the US dollar. The ISM-Chicago Inc. will release the official reading of this barometer at 13:45 GMT.
Correlation with other Majors
Taking into account the business week ended on October 28th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:
GBP/USD to AUD/USD (0.5678, or strong)
GBP/USD to NZD/USD (0.2299, or weak)
GBP/USD to USD/CHF (0.1887, or weak)
GBP/USD to EUR/USD (-0.2054, or weak)
GBP/USD to USD/CAD (-0.4898, or moderate)
GBP/USD to USD/JPY (-0.6830, or strong)
1. During the examined period GBP/USD moved strongly in one and the same direction with AUD/USD, while moving strongly in the opposite direction compared to USD/JPY.
2. The correlation between GBP/USD and NZD/USD, GBP/USD and USD/CHF, GBP/USD and EUR/USD was insignificant.
Bond Yield Spread
The yield on UK 2-year government bonds went up as high as 0.336% on October 28th, after which it closed at 0.292% to lose 0.001 percentage point compared to October 27th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.900% on October 28th, or the highest level since June 2nd (0.911%), after which it fell to 0.857% at the close to lose 3.1 basis points (0.031 percentage point) compared to October 27th.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.565% on October 28th from 0.595% on October 27th. The October 28th yield spread has been the lowest one since August 12th, when the difference was 0.565%.
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 – 1.2199
R2 – 1.2208
R3 (Range Resistance – Sell) – 1.2218
R4 (Long Breakout) – 1.2245
R5 (Breakout Target 1) – 1.2277
R6 (Breakout Target 2) – 1.2291
S1 – 1.2181
S2 – 1.2172
S3 (Range Support – Buy) – 1.2163
S4 (Short Breakout) – 1.2135
S5 (Breakout Target 1) – 1.2103
S6 (Breakout Target 2) – 1.2089
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.2182
R1 – 1.2282
R2 – 1.2373
R3 – 1.2473
R4 – 1.2572
S1 – 1.2091
S2 – 1.1991
S3 – 1.1900
S4 – 1.1808
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.3113
R1 – 1.3312
R2 – 1.3645
R3 – 1.3844
R4 – 1.4042
S1 – 1.2780
S2 – 1.2581
S3 – 1.2248
S4 – 1.1914
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