GBP/USD continues to gain ground this week. In Thursday’s North American session, the pair is trading at 1.3200, up 0.05% on the day. Earlier in the day, GBP/USD touched a high of 1.3250, its highest level since September 21. On the release front, the BoE released its credit conditions survey. In the U.S, key indicators disappointed, as CPI and jobless reports missed their estimates. On Friday, the U.S releases a key consumer confidence gauge, UoM Consumer Sentiment.
U.S. consumer inflation numbers for September fell short of their estimates. CPI and Core CPI both posted small gains of 0.1%, shy of the estimate of 0.2%. On a year-to-year basis, CPI increased 2.3% in September, down from 2.7% in August. Still, with inflation above the Fed’s 2% inflation target, these readings are unlikely to affect the Fed’s plans to raise interest rates in December, which would mark the fourth rate increase this year. The likelihood of a rate hike remains high, with the CME pegging the odds at 76%. On the employment front, unemployment claims climbed to 214 thousand, higher than the estimate of 207 thousand.
Despite much handwringing about what’s in store for the economy after Brexit, the economy is performing fairly well. GDP expanded 0.7% for the three months to August, compared to 0.4% in the three months to May. This was music to the ears of investors who are increasingly nervous over the slow pace of negotiations between the EU and Britain. GDP has now strengthened over three straight quarters. The news was not as good from manufacturing production, which posted a second consecutive loss of 0.2%, short of the estimate of 0.1%.
The mood seems more positive in London and Brussels, as there are reports of progress in the Brexit negotiations. With Britain set to sail away from the EU in March 2019, both sides are sounding more conciliatory, after months of bickering. Still, there are plenty of issues to solve, with the issue of the Irish border one of the thorniest problems. Prime Minister May’s government depends on the tiny DUP party for its survival. The leaders of the DUP, Arlene Foster, met with the EU’s chief negotiator, Michel Barnier on Tuesday. Foster is adamantly opposed to any regulatory barriers between Northern Ireland and the rest of the U.K. However, the EU wants to see Northern Ireland remain in a customs union with the continent, which would require some type of border check between Northern Ireland and the rest of the U.K. Foster has gone so far as to threaten to vote against the budget later this month if May agrees to the EU demands.
High hopes give way to steeper slopes
European open – Trump attacks Fed as markets tank
Thursday (October 11)
- 1:00 BoE Governor Mark Carney Speaks
- 4:30 BoE Credit Conditions Survey
- 5:00 BoE Governor Mark Carney Speaks
- 6:45 External BOE MPC Member Gertjan Vlieghe
- 8:30 US CPI. Estimate 0.2%. Actual o.1%
- 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
- 8:30 US Unemployment Claims. Estimate 207K. Actual 214K
- 10:30 US Natural Gas Storage. Estimate 87B
- 11:00 US Crude Oil Inventories. Estimate 2.3M
- 13:01 US 30-year Bond Auction
- Tentative – US Treasury Currency Report
Friday (October 12)
- 8:30 US Import Prices. Estimate 0.3%
- 10:00 US Preliminary UoM Consumer Sentiment. Estimate 100.4
- 10:00 US Preliminary UoM Inflation Expectations
- 12:30 US FOMC Member Raphael Bostic Speaks
- 12th-18th US Federal Budget Balance. Estimate 71.0B
- 10:30 US FOMC Member Randal Quarles Speaks
*All release times are DST
*Key events are in bold
GBP/USD for Thursday, October 11, 2018
GBP/USD October 11 at 11:20 DST
Open: 1.3193 High: 1.3250 Low: 1.3183 Close: 1.3200
GBP/USD ticked higher in the Asian session. In the European session, the pair edged lower but then recovered. The pair has posted small losses in North American trade
- 1.3173 is providing support
- 1.3301 is the next resistance line
- Current range: 1.3173 to 1.3301
Further levels in both directions:
- Below: 1.3173, 1.2966, 1.2852 and 1.2723
- Above: 1.3301, 1.3447 and 1.3527
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