GBP/USD – Rangebound As UK Retail Sales Slip

GBP/USD is showing little activity in Friday trading, as the pair trades in the mid-1.66 range in the European session. In economic news, British Retail Sales dropped sharply, with a decline of 1.5%. Public Sector Net Borrowing posted a surplus but did fall short of the estimate. In the US, today’s key event is Existing Home Sales. On Thursday, US Unemployment Claims and Core CPI met expectations, but the Philly Fed Manufacturing Index fell to a nine-month low.

British Retail Sales had a dismal January, with a reading of -1.5%, well below the estimate of -0.9%. This indicator is the primary gauge of consumer spending, and is another indication that the British economy may be slowing down. Earlier in the week, British Claimant Count Change improved in January, with a decline of -27.6 thousand, easily beating the estimate of -18.3 thousand. However, the unemployment rate edged higher, coming in at 7.2%. The estimate stood at 7.1%. The unexpected rise in unemployment marks the first time since March that the rate has surpassed the estimate. The Bank of England will face increased pressure to raise interest rates if unemployment drops below the 7.0% level, meaning that the unemployment rate will continue to be closely monitored by investors and analysts.

US numbers were a mix on Thursday. Unemployment Claims dropped slightly last week, coming in at 336 thousand. This was just shy of the estimate of 335 thousand. After some recent weak releases on the employment front, the markets will be pleased with this release. Meanwhile, inflation indicators continue to raise concerns, as Core CPI posted a paltry gain of 0.1% for the second straight month. Weak inflation levels are indicative of weak economic growth and could spell trouble for the US recovery. On the manufacturing front, the Philly Fed Manufacturing Index slumped badly, posting a decline of -6.3 points, compared to +9.4 points a month earlier. This marked the first reading below the zero level since January 2013. US numbers have not looked strong of late, and this has helped the euro hold its ground above the 1.37 level.

This week’s Federal Reserve minutes indicated that interest rates are unlikely to rise, even if unemployment drops to 6.5%. Previously, the Fed had said it would consider raising rates at the 6.5% threshold, but with unemployment falling faster than expected, Fed policymakers agreed that it would “soon be appropriate” to revise the Fed’s forward guidance regarding interest rate levels. The minutes also indicated that the Fed will likely continue trimming QE, barring any downturns in the economy.

GBP/USD for Friday, February 21, 2014

GBP/USD February 21 at 12:15 GMT

GBP/USD 1.6666 H: 1.6688 L: 1.6618

GBP/USD Technical

• GBP/USD is showing little activity in Friday trading. The pound dropped to a low of 1.6618 in the Asian session but has recovered.
• 1.6549 is providing strong support. This is followed by support at 1.6416.
• 1.6705 is the next resistance line. It could face pressure if the pound moves higher. Next, there is resistance at 1.6896, protecting the 1.69 line.
• Current range: 1.6549 to 1.6705.

Further levels in both directions:

• Below: 1.6549, 1.6416, 1.6329 and 1.6231
• Above: 1.6705, 1.6896, 1.6964, 1.7087 and 1.7192

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in Friday trading. This is not consistent with the pair’s current movement, as the pound is rangebound. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar posting gains against the pound.

GBP/USD is showing little movement on Friday. The dollar did show some gains in the European session but was unable to consolidate them.

GBP/USD Fundamentals

• 9:30 British Retail Sales. Exp. -0.9%. Actual -1.5%.
• 9:30 British Public Sector Net Borrowing. Estimate -9.3B. Actual -6.4B.
• 15:00 US Existing Home Sales. Estimate 4.73M.
• 18:45 FOMC Member Richard Fisher Speaks.

*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.