Forex Market: GBP/USD daily trading outlook

Yesterday’s trade saw GBP/USD within the range of 1.3289-1.3533. The pair closed at 1.3430, rising 0.66% compared to Tuesdays close. It has been the 130th gain in the past 283 trading days and also a second consecutive one. The cross has fallen 7.49% so far in June, following a 0.92% drop in the prior month.

At 6:34 GMT today GBP/USD was edging down 0.25% on the day to trade at 1.3397. The pair touched a daily high at 1.3468 during the early phase of the Asian trading session, undershooting the daily R2 level, and a daily low at 1.3363 during late Asian trade.

On Thursday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.

Fundamentals

United Kingdom

Gross Domestic Product

The final estimate of United Kingdoms GDP probably confirmed the 2nd estimate, released on May 26th, that economy expanded at a rate of 2.0% during the first quarter of 2016 compared to the same period a year ago. UK GDP grew at an annualized rate of 2.1% in the fourth quarter of 2015, up from the second and the preliminary estimates, pointing to a 1.9% growth.

According to the revised data, household spending expanded 2.6% year-on-year in Q1, slowing down from a 2.7% surge in the prior quarter. Government spending grew 2.1% year-on-year, decelerating from a 2.2% growth in Q4 2015. Spending growth of non-profit institutions serving households accelerated to 2.0% in Q1 from 3.6% in Q4, while gross fixed capital formation growth decelerated to 1.1% during the period from 2.1% in the preceding quarter. UK exports grew 2.1% in Q1, slowing down from 2.2% in Q4, while UK imports expanded 2.0% in the first quarter of 2016, decelerating from a 4.7% growth in Q4, according to revised data by the Office for National Statistics (ONS).

On a quarterly basis, the final estimate of UK GDP probably also matched the 2nd estimate of a 0.4% growth during Q1, following a 0.6% expansion during the fourth quarter of 2015. The latter has been the fastest quarterly growth since Q2 2015, when the UK GDP rose 0.7%.

In case the final annual rate of growth was in line with expectations or even slower, this would have a strong bullish effect on the sterling. The ONS is to release the final report at 8:30 GMT.

BoEs Carney speech

At 16:00 GMT Bank of England Governor, Mark Carney, is expected to speak, outlining the Banks response to last weeks vote on EU membership.

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 June 24th, probably rose to 267 000, according to market consensus, from 259 000 in the preceding week. The latter has been the lowest number of claims since the business week ended on June 3rd, when an unrevised level of 264 000 was reported.

The 4-week moving average, an indicator lacking seasonal effects, was 267 000, marking a decrease by 2 250 compared to the preceding weeks unrevised average.

The business week, which ended on June 17th has been the 68th 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 rose to the seasonally adjusted 2 150 000 during the business week ended on June 17th, according to the median forecast by experts, from 2 142 000 in the preceding week. The latter represented a drop by 20 000 compared to the revised up number of claims reported in the week ended on June 3rd. 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.

Chicago manufacturing activity barometer

The Chicago Purchasing Managers Index (PMI) probably returned to the zone of expansion in June, improving to a reading of 50.7, according to market expectations, from 49.3 during the prior month. The latter has been the lowest reading since February, when the PMI came in at 47.6. The index reflects business conditions in the regions 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 improved more than forecast, this would have a moderate bullish effect on the US dollar. The ISM-Chicago Inc. will release the official reading of this key barometer at 13:45 GMT.

Feds Bullard speech

At 17:30 GMT the Fed President for St. Louis and also a FOMC member, James Bullard, is expected to take a statement. Any remarks made in regard to the US macroeconomic outlook, or the Banks future policy stance, would certainly boost USD volatility, especially amid the overall uncertainty, following the stunning UK vote on EU membership.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.224% on June 29th, after which it closed at 0.203% to add 2.2 basis points (0.022 percentage point) compared to June 28th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.645% on June 29th, or the highest level since June 24th (0.755%), after which it fell to 0.637% at the close to add 2 basis points (0.02 percentage point) compared to June 28th.

The spread between 2-year UK and 2-year US bond yields, which reflects the flow of funds in a short term, shrank to 0.434% on June 29th from 0.436% on June 28th. The June 29th yield spread has been the lowest one since June 24th, when the difference was 0.362%.