GBP/USD – Pound Jumps as Retail Sales Soar

The British pound has posted sharp gains in Friday trading, gaining around one cent against the US dollar. In the European session, GBP/USD is trading in the mid-1.64 range. The pound got a helpful boost from a superb British Retail Sales of 2.6%, its sharpest rise in over nine years. Later in the day, External BOE MPC Member Ben Broadbent will speak at an event in London. In the US, it’s a busy day with three key events on the schedule – Building Permits, Preliminary UoM Consumer Sentiment and JOLTS Job Openings.

British Retail Sales is the highlight of the week, posting a gain of 2.6% in December. We haven’t seen such a strong jump since October 2004. This easily beat the estimate of 0.5%, and was way above last month’s rise of 0.3%. The whopping gain will likely revive speculation about a possible interest rate hike by the Bank of England. Although Governor Mark Carney has done his best to pour cold water on the idea, the improving UK economy is increasing pressure on the BOE to respond with a rate increase.

US Unemployment Claims looked sharp on Thursday, dropping slightly to 327 thousand, very close to the estimate of 326 thousand. This was welcome news after last week’s shocking Non-Farm Payrolls. With the Fed finally starting its taper of QE, every employment release will be under the market microscope. Meanwhile, the Philly Fed Manufacturing Index continues to move higher. The indicator jumped to 9.4 points, up from 7.0 points a month earlier. This strong reading beat the estimate of 8.8 points.

On Tuesday, the UK released a host of December inflation indicators, and most of the releases were very close to the estimates. CPI, the most important inflation indicator, came in at 2.0%, almost unchanged from 2.1% in November. The estimate stood at 2.1%. CPI has been dropping in recent readings and the December release hit the Bank of England’s inflation target of 2.0%.

GBP/USD for Friday, January 17, 2014

GBP/USD January 17 at 16:15 GMT

GBP/USD 1.6445 H: 1.6458 L: 1.6347

GBP/USD Technical

• GBP/USD has reversed directions and posted sharp gains in Friday trading. After edging lower in the Asian session, the pound rocketed early in the European session, jumping over one cent.
• 1.6416 has reverted to a support role following the pound’s strong gains. This is a weak line which could see strong pressure during the day. This is followed by strong support at 1.6329.
• 1.6549 is providing strong resistance. This is followed by resistance at 1.6705, which has held firm since May 2011.
• Current range: 1.6416 to 1.6549

Further levels in both directions:

• Below: 1.6416, 1.6329, 1.6231, 1.6125 and 1.6000
• Above: 1.6549, 1.6705, 1.6964 and 1.7182

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions in Friday trading. This is not reflected in the pair’s movement, as the pound has posted sharp gains against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing Friday’s slide and moving higher.

The pound has posted strong gains in Friday trading. We can expect further movement during the North American session, as the US releases three key events later in the day.

GBP/USD Fundamentals

• 9:30 British Retail  Sales. Estimate 0.5%. Actual 2.6%.
• 12:15 External BOE MPC Member Ben Broadbent Speaks.
• 13:30 US Building Permits. Exp. 1.01M.
• 13:30 US Housing Starts. Exp. 0.99M.
• 14:15 US Capacity Utilization Rate. Exp. 69.2%.
• 14:15 US Industrial Production. Exp. 0.4%.
• 14:55 US Preliminary UoM Consumer Sentiment. Exp. 83.4 points.
• 14:55 US Preliminary UoM Inflation Expectations.
• 15:00 US JOLTS Job Openings. Exp. 3.97M. 

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.