GBP/USD – Pound rally takes pause, markets await FOMC statement

GBP/USD is unchanged in the Wednesday session, after posting sharp gains on Tuesday. In North American trade, the pair is trading at 1.3064, up 0.01% on the day. It’s a quiet day on the release front. The sole U.K. indicator, CBI Industrial Order Expectations rebounded with a score of 6, crushing the estimate of -5 points. There are no data indicators in the United States. On Thursday, the U.K. releases public sector net borrowing, with the markets expecting a rare budget surplus. The U.S. will release durable goods orders and unemployment claims.

It’s been an impressive rally for the British pound, as GDP/USD has jumped 2.0% since Friday. On Tuesday, the pair climbed to 1.3070, its highest level in two weeks. Investors were pleased with the January job numbers, as the U.K. labor picture remains rosy despite the pressures of the global trade war and the tensions around Brexit. Wage growth remains strong, posting a second straight gain of 3.4%, just below the forecast of 3.5%. The number of employed people continues to grow, and the unemployment rate remained pegged at just 4.0%. Consumer spending surged in January, as retail sales jumped 1.0%, its second strong gain in three months.

The Federal Reserve has turned dovish in 2019, after aggressively raising rates four times in 2018. If recent comments from Fed policymakers are a reliable indication, the minutes from the January policy meeting are also likely to be dovish in tone. The January rate statement discarded previous pledges of “further gradual increases” in interest rates, and said it would be “patient” before any further hikes. The current Fed projection calls for two rate hikes this year, but that is subject to change, based on the strength of the U.S. economy. The markets have priced in a hold on rates for the near-term, with little expectation of a rate hike in the first half of the year.

A golden day for sterling

Yen weakens on delayed reaction to Kuroda

Dollar falls for a fifth straight session

GBP/USD Fundamentals

Wednesday (February 20)

• 6:00 British CBI Industrial Order Expectations. Estimate -5. Actual 6
  
• 14:00 US FOMC Meeting Minutes

Thursday (February 21)

• 4:30 British Public Sector Net Borrowing. Estimate -11.1B
• 8:30 US Core Durable Goods Orders. Estimate 0.2%
• 8:30 US Durable Goods Orders. Estimate 0.8%
• 8:30 US Philly Fed Manufacturing Index. Estimate 15.6
• 8:30 US Unemployment Claims. Estimate 220K

*All release times are EST

*Key events are in bold

GBP/USD for Wednesday, February 20, 2019

GBP/USD February 19 at 11:15 EST

Open: 1.3063 High: 1.3079 Low: 1.3012 Close: 1.3074

GBP/USD Technical

GBP/USD was flat for most of the Asian session. The pair posted small losses in European trade but has reversed directions in North American trade and moved higher

• 1.3070 is a fluid line. Currently, it is a weak support line
• 1.3170 is the next resistance line
• Current range: 1.3070 to 1.3170

Further levels in both directions:

• Below: 1.3070, 1.2910, 1.2851 and 1.2729
• Above: 1.3170, 1.3258 and 1.3372

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