Friday’s trade saw GBP/USD within the range of 1.5180-1.5312. The pair closed at 1.5192, losing 0.64% on a daily basis, while marking its first drop in the past four trading days and also the sharpest one since November 6th, when it depreciated 1.03%. The daily low has been the lowest level since November 17th, when the pair went down as low as 1.5153. In weekly terms, GBP/USD lost 0.27% last week, following a 1.22% surge in the week ended on November 15th.
At 8:23 GMT today GBP/USD was losing 0.19% for the day to trade at 1.5158. The pair touched a daily low at 1.5141 at 7:35 GMT. It has been the lowest level since November 11th, when a daily low of 1.5112 was registered.
Today GBP/USD trading may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
United States
Manufacturing PMI by Markit – preliminary reading
Manufacturing activity in the United States probably slowed down in November, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 52.9, according to market expectations. If so, this would be the lowest reading since October 2013, when the PMI was reported at 51.8. In October the final seasonally adjusted PMI stood at 54.1, improving from a preliminary 54.0.
According to Markits statement: ”New export sales continued to rise at only a modest pace in October, with survey respondents noting that the strong U.S. dollar remained a headwind to growth. Nonetheless, the latest rise in new work from abroad was the third in the past four months, and the fastest since September 2014.”
”Despite rising levels of incoming new work and an upturn in job creation, manufacturers remained relatively cautious in terms of their inventories of finished goods. Reflecting this, post-production stocks were lowered for the third month running and at the fastest pace since June 2014. At the same time, manufacturers sought to boost their stocks of purchases during October, with some citing expectations of rising workloads in the months ahead. Although only modest, the latest increase in pre-production inventories was the sharpest for almost a year.”
”Manufacturers continued to benefit from falling commodity prices in October, with survey respondents widely commenting on reduced costs for steel and other metals. Measured overall, the latest fall in average cost burdens was the fastest since March. Meanwhile, manufacturers indicated that their factory gate charges rose only fractionally, with the rate of inflation the second-slowest for over three years.”
Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a worse-than-anticipated performance, this would have a moderate bearish effect on the US dollar. The preliminary PMI reading by Markit Economics is due out at 14:45 GMT.
Existing home sales
The index of existing home sales in the United States probably fell 1.98% to a level of 5.44 million in October compared to September, according to the median estimate by experts. In September sales were 4.7% higher from a month ago to reach 5.55 million, or the highest level since May 2010, when a figure of 5.66 million was reported. September sales were boosted by a 5.3% surge in sales of single-family houses. At the same time, sales of condos remained flat during the period. The median sale price climbed 6.1% in September compared to the same month a year ago.
In case the index dropped at a steeper monthly rate than anticipated, this would have a limited bearish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 15:00 GMT.
Correlation with other Majors
Taking into account the week ended on November 22nd 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 EUR/USD (0.7785, or strong)
GBP/USD to NZD/USD (0.2603, or weak)
GBP/USD to AUD/USD (0.1276, or weak)
GBP/USD to USD/CHF (-0.0670, or very weak)
GBP/USD to USD/JPY (-0.1735, or weak)
GBP/USD to USD/CAD (-0.9606, or very strong)
1. During the examined period GBP/USD moved strongly in one and the same direction with EUR/USD, while moving almost equally in the opposite direction compared to USD/CAD.
2. GBP/USD moved almost independently in comparison with USD/CHF during the past week.
3. The correlation between GBP/USD and NZD/USD, GBP/USD and AUD/USD, GBP/USD and USD/JPY was insignificant during the period in question.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.647% on November 20th, after which it closed at 0.615% to lose 1.8 basis points (0.018 percentage point) compared to November 19th. It has been the eighth drop in the past ten trading days and also the third consecutive one.
The yield on US 2-year government bonds climbed as high as 0.921% on November 20th, or the highest level since November 6th (0.958%), after which it closed at the exact same level to add 2.9 basis points (0.029 percentage point) compared to November 19th. It has been the fifth consecutive trading day of gains.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, expanded to 0.306% on November 20th from 0.259% on November 19th. The November 20th yield spread has been the largest one in at least six months.
Meanwhile, the yield on UK 10-year government bonds soared as high as 1.908% on November 20th, after which it slid to 1.871% at the close to lose 1.8 basis points (0.018 percentage point) compared to November 19th. It has been the seventh drop in the past ten trading days and also the third consecutive one.
The yield on US 10-year government bonds climbed as high as 2.266% on November 20th, after which it slipped to 2.264% at the close to add 1.7 basis points (0.017 percentage point) compared to November 19th. It has been the fourth gain in the past ten trading days.
The spread between 10-year US and 10-year UK bond yields expanded to 0.393% on November 20th from 0.358% on November 19th. The November 20th yield difference has been the largest one since July 7th, when the spread was 0.437%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.5204
R2 – 1.5216
R3 (range resistance) – 1.5228
R4 (range breakout) – 1.5265
S1 – 1.5180
S2 – 1.5168
S3 (range support) – 1.5156
S4 (range breakout) – 1.5119
By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.5227
R1 – 1.5302
R2 – 1.5411
R3 – 1.5486
S1 – 1.5118
S2 – 1.5043
S3 – 1.4934
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