British pound quiet as a mouse

The British pound has shown little movement since before Christmas and remains quiet on Thursday. This is not surprising as trading volumes are down during the holidays and there are few key events on the calendar this week. In the European session, GBP/USD is trading at 1.2023, up 0.07%.

There are no tier-1 events out of the UK this week, leaving US data in the spotlight. On the manufacturing front, the Richmond Fed Manufacturing Index rebounded to 1 point in December, up sharply from -9 in November and ahead of the consensus of -4 points. The wage index rose to 35 in December, up from 27 in November, another indication that wage growth remains strong.

The US housing sector has been sending mixed signals for November. Existing home sales fell sharply while new home sales rebounded higher. Pending home sales were released on Wednesday, with a disappointing reading of -4.0% m/m, down from 4.7% in October and shy of the consensus of -1.0%. Pending home sales have been in a deep rut, posting a decline for six straight months and 12 of the last 13 months. The housing sector is clearly in trouble, although the silver lining could be that mortgage rates have been declining, which should lead to an increase in house purchases early next year.

Today’s highlight is US unemployment claims. Last week’s release rose slightly, from 214,000 to 216,000. The markets are braced for a jump to 225,000, but the markets are unlikely to react to volatility in the week-to-week releases; the four-week moving averages smooths the weekly data and provide a more accurate picture of unemployment.

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GBP/USD Technical

• GBP/USD has support at 1.1949 and 1.1846
• There is resistance at 1.2095 and 1.2198