Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.2980-1.3032. The pair closed at 1.3019, inching down 0.03% compared to Tuesdays close. It has been the 187th drop in the past 348 trading days. The major pair has increased its drop to 0.91% so far during the current month, after losing 0.72% in August.
At 6:52 GMT today GBP/USD was inching up 0.05% on the day to trade at 1.3026. The pair touched a daily high at 1.3059 during the early phase of the Asian trading session, overshooting the upper range breakout level (R4), and a daily low at 1.3009 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
Consumer Lending, Mortgage Approvals
Lending to consumers in the United Kingdom probably expanded by GBP 1.400 billion in August, according to the median forecast by experts, following an increase by GBP 1.181 billion in July. The latter has been the lowest monthly rate since August 2015, when consumer loans increased by GBP 1.152 billion. Credit card lending rose by GBP 0.5 billion in July, or matching the average increase in the preceding six months. Other loans expanded by GBP 0.7 billion in July, while being below 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 decreased to 60 150 in August, according to experts’ expectations, from 60 910 in July. The latter has been the lowest figure since January 2015, when the revised down 60 710 mortgages approved were reported (60 790 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 fell more than anticipated, this would imply potentially lower demand in the nation’s housing sector and, respectively, a somewhat negative impulse for overall economy. Therefore, it may have a limited-to-moderate bearish effect on the Sterling. Bank of England will release the official numbers at 8:30 GMT.
United States
Fed Speakers
At 9:00 GMT the Fed President for Philadelphia, Patrick Harker, is to take a statement on the economic outlook in front of the Global Interdependence Center Central Banking Series in Dublin.
At 12:50 GMT the Fed President for Atlanta, Dennis Lockhart, is to speak in front of the 2016 Future of Florida Forum in Orlando.
At 14:00 GMT Federal Reserve Board Governor, Jerome Powell, is expected to take a statement before the Community Banking in the 21st Century Conference, which will be hosted by the Federal Reserve Bank of St. Louis.
At 18:00 GMT the Fed President for Minneapolis, Neel Kashkari, is to participate in Town Hall on economic development in Rapid City and surrounding areas.
At 20:00 GMT Fed Chair, Janet Yellen, is expected to speak at the “Banking and the Economy: A Forum for Minority Bankers” conference, which will be hosted by the Federal Reserve Bank of Kansas City.
At 20:15 GMT the Fed President for Kansas City, Esther George, is to speak on “Opportunities and Challenges for the Banking Industry and the Federal Reserve” at the “Banking and the Economy: A Forum for Minority Bankers” conference in Kansas.
Any hints in regard to the Bank’s policy stance or US economic outlook would certainly heighten USD volatility.
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 September 23rd, probably rose to 260 000, according to market consensus, from 252 000 in the preceding week. The latter has been the lowest figure since mid-July.
The 4-week moving average, an indicator lacking seasonal effects, was 258 500, marking a decrease by 2 250 compared to the preceding week’s unrevised average.
The business week, which ended on September 16th, has been the 81st consecutive week, when jobless claims stood below the 300 000 threshold, which suggested a healthy labor market. It has been the longest streak since 1970.
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 2 130 000 during the business week ended on September 16th, according to the median forecast by experts, from 2 113 000 in the preceding week. The latter represented a decrease by 36 000 compared to the revised up number of claims reported in the week ended on September 2nd. 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.
Gross Domestic Product – final estimate
The final estimate of the US Gross Domestic Product probably pointed to an annualized rate of growth of 1.3% in the second quarter of 2016. If so, it would outpace the 2nd GDP estimate, reported on August 26th. The 2nd estimate came below the preliminary one, because trade contribution to the GDP was lower, while the drop in inventories was sharper than anticipated, according to the Bureau of Economic Analysis.
According to the August 26th report, personal consumption expenditure (PCE) contributed 2.94 percentage points to US growth, as it increased 4.4% in Q2. The preliminary GDP report pointed to a 4.2% PCE growth. Fixed investment shrank 2.5% in the second quarter, slowing down from a 3.2% decrease in the preliminary report. Non-residential investment contracted 0.9% during the period compared to a 2.2% slump in the preliminary estimate, while residential investment fell 7.7%, accelerating from a 6.1% drop in the preliminary release.
Private inventories subtracted 1.26 percentage points from US growth in Q2, as business inventories shrank by USD 12.4 billion compared to a drop by USD 8.1 billion, as reported previously.
International trade added 0.1 percentage points to growth in Q2 compared to a contribution of 0.23 percentage points in the preliminary report. US exports rose 1.2% in the second quarter of 2016 compared to a 1.4% increase in the preliminary release, while US imports went up 0.3% during the period compared to a 0.4% drop reported previously.
In case the final GDP estimate met or even exceeded market expectations, this would have a strong bullish effect on the US dollar. The official report is due out at 12:30 GMT.
Pending Home Sales
The index of pending home sales in the United States probably rose 0.3% in August from a month ago, according to the median estimate by experts. In July, pending home sales surged 1.3%, coming well above market expectations. It has been the fastest monthly increase since April. In July, sales in the Northeast area rose 0.8%, those in the South were also 0.8% more, while sales in the West soared 7.3%. On the other hand, sales in the Midwest region went down 2.9% during the same month.
In annual terms, contracts to buy previously owned homes in the United States were 1.4% more in July, accelerating from a 1.0% increase in the preceding period.
In case pending home sales increased at a faster pace than anticipated in August, this would have a moderate bullish effect on the US dollar. The National Association of Realtor’s (NAR) will report on the official index performance at 14:00 GMT.
Bond Yield Spread
The yield on UK 2-year government bonds went up as high as 0.104% on September 28th, after which it closed at 0.080% to lose 0.005 percentage point compared to September 27th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.770% on September 28th, or matching the high from a day ago and also being the highest level since September 23rd (0.787%), after which it fell to 0.769% at the close to add 2.3 basis points (0.023 percentage point) compared to September 27th.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.689% on September 28th from 0.658% on September 27th. The September 28th yield spread has been the largest one since September 22nd, when the difference was 0.693%.
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 – 1.3024
R2 – 1.3029
R3 (Range Resistance – Sell) – 1.3033
R4 (Long Breakout) – 1.3048
R5 (Breakout Target 1) – 1.3064
R6 (Breakout Target 2) – 1.3071
S1 – 1.3014
S2 – 1.3009
S3 (Range Support – Buy) – 1.3005
S4 (Short Breakout) – 1.2990
S5 (Breakout Target 1) – 1.2974
S6 (Breakout Target 2) – 1.2967
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.3001
R1 – 1.3086
R2 – 1.3209
R3 – 1.3294
R4 – 1.3380
S1 – 1.2878
S2 – 1.2793
S3 – 1.2670
S4 – 1.2548
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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