GBP/USD: Higher Despite UK Deficit

The British pound has steadied on Friday, after posting losses for most of the week. In the North American session, the pair is trading at 1.3067, up 0.42% on the day. On the release front, Britain’s debt widened to GBP 4.5 billion, higher than the estimate of GBP 3.6 billion. There are no U.S indicators on the schedule.

Soft British indicators this week have weighed on the pound, which has declined 1.2% this week. Employment data was weaker than expected on Tuesday, and this was followed by a soft CPI release a day later. On Thursday, retail sales declined 0.5%, surprising the markets which had expected a gain of 0.1%. This marked the first decline since March. The weak numbers have dampened expectations that the BoE will raise interest rates at its August meeting. With the May government continuing to squabble over Brexit and negotiations with the EU at a standstill, the pound could face further headwinds and drop under the symbolic 1.30 level.

The tariff slugfest between the U.S and its major trading partners has raised serious concerns not just with investors, but with Federal Reserve policymakers as well. The Federal Reserve Beige Book for July, released on Wednesday, was rife with references to ‘tariffs’. This trend started in the April Beige Book after President Trump threatened in March to impose tariffs on China. Most of the twelve Fed regional districts referred to tariffs in their inpidual reports, which make up the Beige Book. Some Fed policymakers have also voiced their concern over the impact that tariffs could have on the U.S economy and is an issue the Fed will have to take into consideration, as it mulls over rate policy for the next six months.

GBP/USD Fundamentals

Friday (July 20)

  • 4:30 British Public Sector Net Borrowing. Estimate 4.5B. Actual 3.6B

*All release times are DST

*Key events are in bold

GBP/USD for Friday, July 20, 2018

GBP/USD

GBP/USD July 20 at 8:50 DST

Open: 1.3013 High: 1.3070 Low: 1.2995 Close: 1.3062

GBP/USD Technicals

S1S2S1R1R2R31.27061.28521.29961.30881.31861.3263

GBP/USD showed limited movement in the Asian and European sessions. The pair has edged higher in North American trade

  • 1.2996 was tested earlier in support
  • 1.3088 is under pressure in resistance, following gains by GBP/USD on Friday
  • Current range: 1.2996 to 1.3088

Further levels in both directions:

  • Below: 1.2996, 1.2852 and 1.2706
  • Above: 1.3088, 1.3186, 1.3263 and 1.3494

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