Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.2954-1.3059. The pair closed at 1.2968, edging down 0.39% compared to Wednesdays close. It has been the 188th drop in the past 349 trading days and also a second consecutive one. The major pair has increased its drop to 1.30% so far during the current month, after losing 0.72% in August.
At 6:57 GMT today GBP/USD was inching down 0.07% on the day to trade at 1.2959. The pair touched a daily high at 1.2979 during the late phase of the Asian trading session, overshooting the daily R1 level, and a daily low at 1.2946 during early Asian trade.
On Friday GBP/USD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United Kingdom
Gross Domestic Product – final estimate
The final estimate of United Kingdom’s GDP probably confirmed the 2nd estimate, released on August 26th, which showed economy expanded at an annualized rate of 2.2% during the second quarter of 2016. It has been the fastest rate of growth since Q2 2015. UK GDP grew at an annualized rate of 2.0% in the first quarter of the year, confirming the second estimate.
According to the revised data, household spending rose 3% year-on-year in Q2, accelerating from a 2.8% surge in the prior quarter. Government spending rose 0.8% year-on-year, decelerating from a 1.9% growth in Q1. Spending growth of non-profit institutions serving households also decelerated to 0.8% in Q2 from 2.2% in Q1, while gross fixed capital formation growth accelerated to 0.9% during the period from 0.7% in the preceding quarter. UK exports grew 2.7% in Q2, improving from a 2.3% rate in Q1, while UK imports expanded 5% in the second quarter of 2016, accelerating from a 1.7% growth in Q1, according to revised data by the Office for National Statistics (ONS).
On a quarterly basis, the final estimate of the UK GDP probably also matched the 2nd estimate of a 0.6% growth during Q2, according to market expectations, following a 0.4% expansion during the first quarter of the year.
In case the final annual rate of growth was in line with market consensus or even faster, this would have a strong bullish effect on the Sterling. The ONS is to release the final report at 8:30 GMT.
United States
Personal Income, Personal Spending and PCE Inflation
Personal spending in the United States probably grew 0.1% in August, according to market expectations, while personal income was probably up for a 17th consecutive month in August, increasing at a monthly rate of 0.2%.
Consumer spending, which accounts for over two thirds of the nation’s GDP, rose 0.3% in July, after a revised up 0.5% gain in June. July’s increase came as a result of higher spending on new motor vehicles and on services, which was partially offset by a drop in spending on non-durable goods.
At the same time, personal income increased 0.4% in July, following a 0.2% surge in the prior month. In July, wages and salaries went up 0.5%, proprietors’ income rose 0.2%, while rental income increased 0.7%. On the other hand, personal dividend income rebounded in July, going up 0.4%, as well as personal interest income, which was 0.4% higher.
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 1.7% year-on-year in August, according to expectations. Annualized PCE inflation was at 1.6% in the previous five months. On a monthly basis, the Core PCE Price Index probably increased for an eighth consecutive month in August, going up 0.2%, according to analyst projections.
Chicago manufacturing activity barometer
The Chicago Purchasing Managers’ Index (PMI) probably accelerated to a reading of 52.0 in September, according to market expectations, from 51.5 during the prior month. If so, September would be the fourth consecutive month of activity expansion in the region. In August, the gauges of new orders and production rose at a slower rate, while the sub-index of employment soared to a 16-month high.
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 accelerated 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 barometer at 13:45 GMT.
Reuters/Michigan Consumer Sentiment Index – final reading
The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States improved in September from a month ago. The final reading of the corresponding index, which usually comes out two weeks after the preliminary data, probably was at 90.0, up from a preliminary value of 89.8. In August the index stood at a final reading of 89.8, down from a preliminary value of 90.4. The survey encompasses about 500 respondents throughout the country. The index is comprised by two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.
According to the preliminary report, the sub-index of current economic conditions, which measures US consumers’ views of their personal finances, went down to 103.5 in September from a final reading of 107.0 in August. The sub-index of consumer expectations accelerated to a flash reading of 81.1 in September from a final value of 78.7 in August.
Respondents in the September survey expect that the rate of inflation during the next year will probably be 2.3%, or the lowest since September 2010, down from 2.5% as expected in the August survey.
In case the final value of the September consumer sentiment index outpaced the median forecast by analysts, this would have a moderate bullish effect on the US dollar. The final reading is due out at 14:00 GMT.
Bond Yield Spread
The yield on UK 2-year government bonds went up as high as 0.106% on September 29th, after which it closed at 0.068% to lose 0.009 percentage point compared to September 28th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.778% on September 29th, or the highest level since September 23rd (0.787%), after which it fell to 0.734% at the close to lose 2.4 basis points (0.024 percentage point) compared to September 28th.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.666% on September 29th from 0.681% on September 28th. The September 29th yield spread has been the lowest one since September 27th, when the difference was 0.661%.
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 – 1.2978
R2 – 1.2987
R3 (Range Resistance – Sell) – 1.2997
R4 (Long Breakout) – 1.3026
R5 (Breakout Target 1) – 1.3059
R6 (Breakout Target 2) – 1.3073
S1 – 1.2958
S2 – 1.2949
S3 (Range Support – Buy) – 1.2939
S4 (Short Breakout) – 1.2910
S5 (Breakout Target 1) – 1.2877
S6 (Breakout Target 2) – 1.2863
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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