US homebuilding activity dropped more than expected last month amid the unusually warm weather and weaker manufacturing activity, official figures revealed on Tuesday. The US Department of Commerce reported that housing starts fell 6.8% to a seasonally adjusted rate of 1.22M, as construction of single-family homes in the Midwest posted the largest decline since 2014. Meanwhile, market analysts anticipated a slighter drop to a 1.25M unit rate in March, following the preceding month's upwardly revised 1.30M unit rate. On an annual basis, housing starts were up 9.2%. Data also showed that building permits climbed to a 1.26M unit rate in March, compared to the previous month's upwardly revised 1.22M unit rate, whereas analysts expected a rise to 1.25M unit rate.
Separately, the Federal Reserve reported that manufacturing output plunged 0.4% in March, driven by a 3.0% decrease in the motor vehicle and part sector. On a yearly basis, manufacturing output advanced 2.7% in the Q1 of 2017. Both reports raised concerns over the Fed postponing its second rate hike this year. Moreover, the data suggested that the US economy performed weaker than expected in the Q1. Following Tuesday's releases, the US Dollar hit its three week low against a basket of major currencies.
All ears on Carney's speech
GBP/USD struggles to remain at seven-month high
As was anticipated, the GBP/USD currency pair underwent a correction on Wednesday, passing through only the immediate support, namely the weekly R3. According to technical studies, the Cable should continue to weaken today, with the upper Bollinger band and the weekly R3 now acting as a relatively strong resistance area. In case bears do take over the market, the Sterling would risk slipping under 1.27, despite the weekly R2 providing support around that area. Ultimately, a plunge towards 1.2620 is possible, as geopolitical factors keep weighing on the given pair. On the other hand, another leg up is unlikely to cause the 1.2850 mark to get pierced today.
Daily chart
Hourly chart
Traders are equally divided
Today both the market sentiment and all pending orders reached a perfect equilibrium.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 57% of all open positions are short and the remaining 43% are long. Meanwhile, sentiment at Saxo Bank remained unchanged over the day, with 53% of traders now being short and the other 47% being long the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
By the end of the next three months traders believe the Cable is to rise above the 1.26 major level, as 56% of survey participants believe so. While the current price is around 1.28, the average forecast for July 20 is 1.2616. The 1.30-1.32 range is now the most popular price interval, having 16% of the votes, while on the second place are the 1.18-1.20 and the 1.28-1.30 price ranges, with 14% of poll participants choosing each of them. Furthermore, the 1.20-1.22 and the 1.26-1.28 intervals were selected by 12% of the voters.