GBP/USD – Soft Employment Data Sends Pound South

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Updated: Dec 19, 2019, 07:25 GMT+00:00

After soaring to impressive heights last week, the British pound has retreated. Weak economic data and investor worry over frosty relations between London and Brussels are weighing on the pound.

Major Resistances Are Broken – Time To Go Up

GBP/USD has stabilized in Wednesday trade, but remains under pressure. Currently, the pair is trading at 1.3115, down 0.06% on the day.

U.K. Job Numbers Fall Short

Weak economic data this week has weighed on the pound, which is down 1.7% so far this week. On Tuesday, key employment indicators missed their estimates, pointing to weakness in the labor market. Wage growth slowed to 3.2% in October, down from 3.4% in the previous release. This is the weakest gain since April. Unemployment claims dropped to 28.8 thousand, compared to 33.0 thousand a month earlier. Still, this was much higher than the forecast of 21.2 thousand. There was more bad news as CBI Industrial Order Expectations slipped to -28, weaker than the estimate of -25 pts.

Bad Blood Between Brussels and Boris

Aside from dismal British data this week, the post-election euphoria has quickly dissipated, and this is quickly brought the pound back down to earth. Prime Minister Boris Johnson and the European Union have had a frosty relationship, and tempers will be put to the test right after the U.K. bids farewell on January 31. The sides must hammer out a free-trade deal, which promises to be a tall order. Johnson has said the deal must be wrapped up during the 11-month transition period, but the Europeans argue that this will barely be enough time to provide a ‘bare-bones’ arrangement, and more time is needed for such a complex undertaking.

Technical Analysis

After breaking past resistance lines last week, GBP/USD has fallen hard and is back in familiar territory. There is resistance at 1.3200, followed closely by resistance at 1.3225. On the downside, 1.3100 is an immediate support line, followed by 1.3050.

Pacific Currencies – Summary

USD/CNY

USD/CNY continues to hover at the 7.00 level, which has psychological significance. Currently, the pair is trading at 7.0001, up 10% on the day. I expect the pair to stay very close to the 7.000 level on Wednesday.

AUD/USD

The downward trend continues for AUD/USD, which has not mustered a winning day in almost a week. Currently, the pair is trading at 0.6843, down 0.12% on the day. We could see the pair change directions, early on Thursday, as analysts have projected that the economy created 14.3 thousand jobs in November, compared to a decline of 19.0 thousand in October.

NZD/USD

NZD/USD has posted small losses for a fifth straight day. Currently, the pair is trading at 0.6559, down 0.13% on the day. Later in the day, New Zealand releases GDP for Q3, which is expected to remain steady at 0.5%. We’ll also get a look at trade balance data.

About the Author

Kenny Fisherauthor

Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.

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