GBP/USD: Calm As Pound Tries To Stem Losses
MarketPulse | Aug 22, 2014 08:06AM ET
The British pound is under pressure Friday as GBP/USD is trading in the mid-1.65 range. The pound is currently at its lowest levels since early April. There are no economic releases out of the US or the UK today. The markets will be closely monitoring the symposium in Jackson Hole, Wyoming, with Federal Reserve Chair Janet Yellen delivering the keynote speech on Friday.
Financial leaders and central bankers from around the world have gathered in picturesque Jackson Hole, Wyoming. This is Janet Yellen's first appearance as Fed chair at the conference, and she will deliver a keynote speech on Friday. There is speculation that Jackson Hole could be a currency event, which would be a marked departure from the conference's usual focus on the US labor market and monetary policy. If this is the case, we could see a sharp reaction from the currency markets. Traders should therefore be prepared for some movement from GBP/USD during the day.
US releases wrapped up the week on a high note. Unemployment Claims improved to 298 thousand, lower than the estimate of 302 thousand. The key indicator has now beaten the estimate in six of the past seven readings. Thursday's other key event, the Philly Fed Manufacturing Index, shot higher in July, rising to 28.0 points. The markets had expected the indicator to slip to 19.7 points. There was more good news on the housing front, as Existing Home Sales improved to 5.15 million, well above the estimate of 5.01 million. This marked the highest level we've since September 2013. What is particularly encouraging is that the data stems from a wide range of sectors, which points to balanced economic growth.
In a highly anticipated event, the Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated. Once the asset purchase scheme is terminated, the guessing game as to a rate hike will only intensify. Will Janet Yellen provide some clues when she speaks in Jackson Hole?
In the UK, Retail Sales was a disappointment, with a second straight reading of 0.1%. The weak releases point to weakness in consumer spending, a key component of economic growth. Earlier this week, the BOE minutes surprised the markets with the breakdown of the vote on the interest rate decision. The vote was 7-2 to maintain rates, with BOE board members Martin Weale and Ian McCafferty in favor of an immediate rise in the bank rate. This marks the first split vote on the interest rate level in over three years. The surprisingly strong dissent within policymaker ranks could reignite speculation about a raise in rates and bolster the shaky pound.
Get The News You Want
- GBP/USD 1.6578 H: 1.6595 L: 1.6668
GBP/USD Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.6382 | 1.6484 | 1.6565 | 1.6700 | 1.6825 | 1.6920 |
- GBP/USD has not shown much movement during the day. The pair touched a high of 1.6595 early in the European session.
- 1.6700 has some breathing room as the pound continues to lose ground.
- 1.6565 is under strong pressure. Will the pair break below this level? 16484 is next.
- Current range: 1.6565 to 1.6700.
Further levels in both directions:
- Below: 1.6565, 1.6484 and 1.6382
- Above: 1.6700, 1.6825, 1.6920 and 1.7000
OANDA's Open Positions Ratio
GBP/USD is almost unchanged in Friday trade. This is consistent with the lack of movement displayed by the pair. The ratio has a large majority of long positions, indicative of trader bias towards the pound breaking out and moving to higher ground.
GBP/USD Fundamentals
- Day 2 - Jackson Hole Symposium.
- 14:00 US Federal Reserve Chair Janet Yellen Speaks at Jackson Hole.
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