The US economy grew less than expected in December quarter even in spite of higher consumer spending observed in the reported period. Figures released on Tuesday showed the US economy grew at an annualised pace of 1.9% in the Q4, following a strong 3.5% reading registered in the preceding quarter and falling behind analysts' expectations for a 2.1% rise. In the report, the Commerce Department highlighted that the economic growth was mainly boosted by consumer spending that was revised to 3.0% from 2.5% reported previously. With household spending accounting for no less than 70% of the American economic activity, analysts around the world remained optimistic on the overall growth in the country in the months ahead. Furthermore, the report revealed that the surge in purchases by consumers in the final quarter of 2016 was mainly driven by higher sales of new cars and trucks.
Apart from that, Americans were seen to have spent more on health care. On balance, inventory investment was revised down to $46.2B from $48.7B, while spending on equipment rose a more modest 1.9% instead of 3.1% originally estimated. Moreover, there were changes in trade figures, with imports climbing 8.5% along with a sharp 4.0% decline in observed in exports.
A number of US data are due
GBP/USD: key support broken, weakness expected
Buck's strength caused the Cable to slide further down, breaching the strong demand cluster at 1.24. From this point on more, more bearish momentum is likely to follow, as the 55-day SMA pierced the 100-day one on Monday, providing a signal to sell the Pound. The breach of the key support cluster also indicates that the Sterling could relatively soon retest the 1.20 mark. A drop that low is yet to occur, but today trade is expected to close circa 1.2320, while being supported by the weekly S2 slightly lower. Meanwhile, technical indicators retain mixed signals, unable to confirm the possibility of the negative outcome.
Daily chart
Hourly chart
Traders mostly bullish
Bulls gave in again, as they now take up 59% of the market, compared to 60% on Tuesday. At the same time, the portion of orders to sell the British currency increased from 49 to 57%.
A slightly more optimistic situation is observed elsewhere. For example, 61% of positions open at OANDA are currently long. This is more than the share of shorts (39%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 62% of traders now being long and the other 38% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to rise above the 1.22 major level, as 55% of survey participants believe so. While the current price is around 1.24, the average forecast for June 01 is 1.2397. The 1.20-1.22 interval is now the most popular price interval, having 21% of the votes, while on the second place is the 1.28-1.30 price range, with 17% of poll participants choosing it. Furthermore, the 1.16-1.18 and the 1.18-1.20 intervals were each chosen by 14% of the voters.