GBP/USD opened at around 1.5980 last Monday and persisted at that level for the duration of the day. Direction for the currency pair remained absent on Tuesday as rumours of a deal to end the government shutdown boosted the 'Greenback' during the morning but as the talks collapsed during the evening, so did the US Dollar's rallies. In Britain it was reported that CPI inflation printed slightly higher-than-anticipated at 2.7% during September.
The Pound rose on Wednesday morning as UK Jobless Claims plummeted at their fastest rate since 1997. The -41,700 reduction in benefit claims was accompanied by a 155,000 increase in new jobs, however, the headline Unemployment Rate held steady at 7.7%.
The US Dollar received a temporary boost on Wednesday evening as US politicians finally agreed upon a deal to raise the debt ceiling and avoid falling off the fiscal cliff. However, these relief rallies proved fleeting and GBP/USD surged higher by around two cents to 1.6160 on Thursday as traders began to calculate the cost of the 16-day government shutdown. Analysts estimate that fourth quarter GDP will print -0.6% weaker due to the furlough of hundreds of thousands of Federal employees. The debt debacle also makes it a lot less likely that the Federal Reserve will opt to slowdown its asset purchasing programme before the year is out.
Sterling was supported by a stronger-than-expected UK Retail Sales print of 0.6% for September. GBP/USD continued to carve a higher top on Friday, reaching a 3-week high of 1.6224.
Direction for the cable pairing this week will be dictated by US taper speculation and UK growth output. Tomorrow sees the US Department of Labour release its highly influential Non-farm Payrolls report for September, which was postponed during the government shutdown. A score of 180,000 is predicted, which is likely to be taken as a neutral indicator, however, any deviations from the forecast could prove monumental in GBP/USD positioning. A stronger score could help bring taper talk back to the table, thus boosting the 'Greenback', whilst a softer result could put QE3 reduction rumours to bed and therefore dampen speculators' interest in the US Dollar.
The next key event is scheduled to take place on Friday in the form of the UK third quarter GDP print. It is expected to show an expansion of 0.8%, however, a more robust score cannot be ruled out. If UK Q3 GDP were to print at 1.0% then it is entirely possible that the Pound could strike a fresh 10-month high above 1.6300 against the US Dollar. .
