Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.3117-1.3251. The pair closed at 1.3163, shedding 0.45% compared to Wednesdays close. It has been the 164th drop in the past 304 trading days and also the steepest one since July 22nd, when the pair fell 0.92%. The daily high has been the highest level since July 22nd, when a high of 1.3290 was registered. The major pair has increased its slump to 1.13% so far during the current month, after depreciating 8.06% in June.
At 6:46 GMT today GBP/USD was edging up 0.18% on the day to trade at 1.3187. The pair touched a daily high at 1.3218 during the mid phase of the Asian trading session, overshooting the range resistance level (R3), and a daily low at 1.3149 during early Asian trade.
On Friday GBP/USD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United Kingdom
Consumer Lending, Mortgage Approvals
Lending to consumers in the United Kingdom probably decreased to GBP 1.400 billion in June from GBP 1.503 billion in May. The latter has been the highest amount borrowed since March, when a revised down figure of GBP 1.822 billion was reported. Credit card lending rose by GBP 0.4 billion in May, or matching the average increase in the preceding six months. Other loans expanded by GBP 1.1 billion in May, also matching the average rate of increase in the prior six months.
This indicator represents borrowing by the UK personal sector (individuals only) to fund current expenditures on goods and services, which are a driving force behind economic growth.
Within a sluggish economy, in case lending to individuals shrank more than projected, this would usually have a moderate bearish effect on the sterling, and vice versa. Bank of England (BoE) is to release the official numbers at 8:30 GMT.
At the same time, the number of mortgage approvals in the United Kingdom probably decreased to 65 650 in June, according to experts’ expectations, from 67 040 in May. If so, this would be the lowest figure since May 2015, when a revised up number of 64 830 mortgages approved was reported (64 430 previously). Mortgage approvals are considered as a leading indicator, reflecting the health of the country’s housing market. In case the number of mortgages approved fell more than anticipated, this would imply potentially lower demand in the nations housing sector and, respectively, a somewhat negative impulse for overall economy. Therefore, it would have a limited-to-moderate bearish effect on the Sterling. Bank of England will release the official data at 8:30 GMT.
United States
Gross Domestic Product – preliminary estimate
The preliminary estimate of the US Gross Domestic Product probably pointed to an annualized rate of growth of 2.6% in the second quarter of the year, according to market expectations. If so, this would be the fastest annual rate of growth since the second quarter of 2015, when US economy grew at a final 3.9%. The final GDP estimate for Q1, reported on June 28th, pointed to an annual growth of 1.1%, a revision up compared to the second GDP estimate.
Consumer spending in the country rose 1.5% year-on-year in the first quarter of 2016, decelerating from a 1.9% surge in the second estimate, and following a 2.4% expansion in the fourth quarter of 2015. The Q1 rate of growth has been the slowest one since the first quarter of 2014.
Fixed investment shrank at a final 0.4% year-on-year in Q1, improving from a 1.5% contraction in the second estimate, as non-residential investment contracted 4.5% and residential investment rose 15.6%. Fixed investment was 0.4% higher in Q4 2015 compared to the same period a year ago.
US exports grew at an annualized rate of 0.3% in Q1, following a 2.0% contraction in the second estimate, while shrinking 2.0% in Q4 2015. At the same time, US imports shrank at a final 0.5% year-on-year in the first quarter of 2016, accelerating from a 0.2% decrease in the second estimate and following a 0.7% decline in the fourth quarter of 2015, according to data by the US Department of Commerce.
In case the preliminary GDP estimate met or even outpaced expectations, this would certainly boost the US Dollar. The preliminary data is due out at 12:30 GMT.
Meanwhile, the Employment Cost Index (ECI) for the United States probably rose 0.6% during the second quarter of the year compared to Q1, following another 0.6% gain in Q1 compared to Q4 2015. This index measures the change in the price of labor, defined as compensation per employee hour worked. It shows changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. The ECI is considered as an indicator, reflecting cost pressures within companies that could trigger price inflation for finished goods and services. A larger than expected rate of increase would generally support demand for the US dollar. The Bureau of Labour Statistics is to release the quarterly data at 12:30 GMT.
Reuters/Michigan Consumer Sentiment Index
The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States was lower in July from a month ago. The final reading of the corresponding index, which usually comes out two weeks after the preliminary data, probably came in at 90.5, up from a preliminary value of 89.5. In June the index stood at a final reading of 93.5, down from a preliminary value of 94.3. 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 preliminary data, the sub-index of current economic conditions, which measures US consumers’ views of their personal finances, went down to 108.7 in July from a final reading of 110.8 in June. The sub-index of consumer expectations decelerated to a flash reading of 77.1 in July from a final value of 82.4 in June.
Respondents in the July survey expect that the rate of inflation during the next year will probably be at 2.8%, up from 2.4% as expected in the June survey.
In case the final value of the July 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.
Fed Speakers
At 13:30 GMT the Fed President for San Francisco and also a FOMC member, John Williams, is expected to take a statement, followed by the Fed President for Dallas and also a member of the Committee, Robert Kaplan, at 17:00 GMT. Any remarks on macroeconomic outlook or the Banks monetary policy stance would certainly boost USD volatility.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.154% on July 28th, after which it closed at 0.131% to add 0.002 percentage point compared to July 27th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.738% on July 28th, after which it fell to 0.707% at the close to lose 1.5 basis points (0.015 percentage point) compared to July 27th.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.576% on July 28th from 0.593% on July 27th. The July 28th yield spread has been the lowest one since July 22nd, when the difference was 0.572%.
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 – 1.3175
R2 – 1.3188
R3 (Range Resistance – Sell) – 1.3200
R4 (Long Breakout) – 1.3237
R5 (Breakout Target 1) – 1.3280
R6 (Breakout Target 2) – 1.3297
S1 – 1.3151
S2 – 1.3138
S3 (Range Support – Buy) – 1.3126
S4 (Short Breakout) – 1.3089
S5 (Breakout Target 1) – 1.3046
S6 (Breakout Target 2) – 1.3029
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.3163
R1 – 1.3264
R2 – 1.3418
R3 – 1.3519
R4 – 1.3621
S1 – 1.3009
S2 – 1.2908
S3 – 1.2754
S4 – 1.2601
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.3817
R1 – 1.4517
R2 – 1.5722
R3 – 1.6422
R4 – 1.7121
S1 – 1.2612
S2 – 1.1912
S3 – 1.0707
S4 – 0.9501
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