14 Dec TRADING EDUCATION: GBP USD
The GBPUSD is the oldest tradable currency pair in the world. Often referred to as the ‘The Cable’, due to the fact it was traded using the first transatlantic communication cable, between Great Britain and the United States.
For those members new to trading forex the GBPUSD is likely to be a major fixture within your day as you learn to trade. So it’s no surprise our highly accurate GBPUSD forecast is one of the most used pairs on our currency pressure forecasts.
Traders should always be aware of forex patterns, this is especially true within ‘The Cable’ (GBPUSD) as traders are trading the world’s largest economy (the USD) against the world’s top financial Capital (GBP, London). As the doyen of the forex market the GBPUSD can be highly affected by economic data from within both the UK economy and the US economy, with swings that can encompass 100-150 pips around data publication.
However, when economic data is light it is not unusual to see the GBPUSD trade as narrowly as 20 pips. With our in house pound dollar forecast we are able to show our members exactly when high levels of positive and negative pressure may occur within this pair.
CURRENCY PAIR CORRELATIONS: GBPUSD
Primary Trading Times For The GBPUSD
Major Economic News Events affecting the GBPUSD
Central Bank Data
Due to the size of the U.S. economy and the position of the UK as the world’s financial capital interest rate decisions by the Bank of England and the Federal reserve can have a very significant impact on the GBP USD with average moves as a consequence of the central banks decisions sitting between 90-175 pips.
The federal reserve publishes its interest rate at 19:00 GMT meaning that changes to monetary policy within the U.S. tend to happen while the GBP is at its quietest as a result we can often see significant directional moves within the USD that can last through the night and well into the next day’s European trading session.
The Bank of England on the other hand, has now combined all of its major data releases in to a single event, called Super Thursday by the press. The bank of England publishes its interest rate once a month on a Thursday and four times a year simultaneously publishes its Inflation Forecasts for the UK at the same time.
Changes to monetary policy by the BoE coming as they do at 12:30 GMT can often have significant influence on the GBP USD as well as the FTSE 100 and major US indices such as the DJIA and the S&P 500.
The GBP has three major Employment figures all of which are published simultaneously. The most impactful of which is the monthly Claimant Count Change figure followed closely by Average Earnings Growth Data and the UK’s unemployment rate. The combination of these three releases can tell traders a significant amount about the state of the UK economy as well as near term consumer demand levels.
U.S. employment data centres around two major releases Non-Farm Payrolls (NFP) figures on the first Friday of the month and Initial Jobless Claims which are published every Thursday. Both figures but especially the NFP data are watched closely by forex traders because they provide a clear understanding of conditions within the U.S. economy.
Consumer spending & Inflation
U.S. CPI and Core CPI inflation figures can significantly influence the GBP USD markets. Published forex market opens at 13:30 GMT CPI Inflation and Core CPI Inflation can move the market by an average of 85 – 135 pips.
During Periods of negativity or uncertainty within the U.S. economy forex traders focus on the publication of Core CPI inflation data as this gives a clearer picture by removing temporary factors that may cause price deflation/inflation in the near term. However, when the USD is experiencing a risk on market environment the standard CPI inflation measure tends to have the most impact on the GBP USD.
In the case of the GBP forex traders have a tendency to concentrate on the UK’s Core CPI Inflation figures regardless of the economic environment within the UK as changes to Core CPI Inflation Growth within the GBP can be key to detecting shifting trends in GBP USD.
Economic Sentiment & GDP
With the united states being the largest economy in the world, how the U.S. economy performs can have significant ramifications on all the major currencies and especially on the GBP USD.
GDP Growth data is designed to measure the percentage change in the total value of all goods and services produced by an economy from one Quarter to the next. As a result, GDP data for both the UK and U.S. economies can create an average of a 90-150 pip move within the GBP/USD.
After the 2008 financial crisis Annual budget statements from both the U.S.A and the UK have meaningfully increased their market impact. Domestic government spending and borrowing levels can have a significant impact on an economy – increased spending creates jobs, while borrowing levels impact the nations credit rating and provide insight into the nation’s underlying fiscal position.
Both nations have seen their deficits rise in recent years, as a result forex traders listen carefully to budget statements as they provide indications of economic strength and weakness. This can result in budget statement’s creating new long-term trends within a currency.