GBP USD struggling near four month lows after UK US data releases

Despite overall strength in the dollar on Wednesday morning due to a better-than-expected US private employment report, sterling received its own boost earlier when the UK released its current account deficit data.

Automatic Data Processing, Inc. estimated that US private companies added 200,000 new positions in September against prior expectations of 192,000, prompting a broad surge for the US dollar after moderate weakness earlier in the week.

Prior to this report, however, the UK’s Office for National Statistics released current account data that showed a deficit of £16.8 billion for the second quarter of 2015, significantly lower than prior expectations of a £22.2 billion deficit. Furthermore, the first quarter deficit was revised down from £26.5 billion to £24.0 billion.

This combination of positive data for both currencies prompted GBP/USD to fluctuate near Tuesday’s four-month intraday low of 1.5127 after a week-and-a-half of sharp declines.

From its perch around the 1.5500 level early last week, GBP/USD fell all the way down below its key 1.5200 support target by the end of last week for a significant 2% drop in the course of just five days. The current week thus far has seen the currency pair remain mostly below the 1.5200 level.

GBP/USD should continue to be pressured by US dollar strength, especially in light of continued signals from the Fed regarding a likely 2015 rate hike. Fed Chair Janet Yellen is due to speak again this afternoon, and will be watched closely for further indications of rate hike timing.

If the current downside momentum is sustained below the 1.5200 level, the next major bearish target is at the 1.5000 psychological support level, which has served as both support and resistance since the beginning of the year. Any further downside move could then begin to target the key 1.4800 support objective.