GBP/USD: Pound Pushes Above 1.31, British Manufacturing Report Ahead

 | Aug 22, 2016 09:27AM ET

The British pound has started the week with considerable gains. Early in Monday’s North American session, GBP/USD is trading at the 1.31 line. On the release front, there are no events out of the UK or US. On Tuesday, the US releases New Home Sales, a key indicator.

The Brexit referendum vote to leave the European Union in June shook up the financial markets and sent the pound plunging to 30-year lows. Ever since then, there has been widespread concerns that “hard” UK data in the third quarter would point to a sputtering British economy, possibly even point a recession. However, July releases across the economy looked sharp and the pound gained 1.2% last week. CPI started things rolling with a gain of 0.6%, its best showing since November 2014. This continued with solid employment numbers, as unemployment rolls shrunk by 8.6 thousand and wage growth jumped 2.4%. Retail Sales impressed with a gain of 1.4%, crushing the estimate of 0.1%. On Friday, Public Sector Net Borrowing followed suit, posting a rare surplus. The indicator came in at GBP 1.3 billion, although this was short of the forecast of GBP 2.3 billion. Still, the reading marked the first monthly surplus since January. If British numbers continue to defy the Brexit doomsayers, the government may be able to avoid adopting stimulus measures in the fall budget. The BoE demonstrated iron resolve and took drastic monetary action in August, cutting interest rates to an all-time low of 0.25% and expanding its asset-purchase program to GBP 435 billion. A significant economic report card will be delivered on August 26, with the release of Second Estimate GDP. If the indicator can match or beat the forecast of 0.6%, the pound could post strong gains.

GBP/USD Fundamentals

Monday (August 22)

  • There are no British or US events on the schedule

Tuesday (August 23)

  • 6:00 British CBI Industrial Order Expectations. Estimate minus -9
  • 10:00 US New Home Sales. Estimate 575K

*All release times are EDT

GBP/USD for Monday, August 22, 2016