GBP/USD – Pound Slips as Retail Sales Nosedive

The British pound has posted considerable losses in the Thursday session. In North American trade, GBP/USD is trading at 1.3176, down 0.66% on the day. On the release front, British CBI Realized Sales plunged in October, with a reading of -36 points. This surprised the markets, which expected a gain of 14 points. In the US, unemployment claims climbed to 233 thousand, just below the forecast of 235 thousand. As well, Pending Home Sales rebounded, coming in at 0.0%. The indicator has struggled, recording five declines in the past 6 months.

The pound recorded strong gains on Wednesday after British Preliminary GDP beat expectations in the third quarter. However, the rally proved to be short-lived, as the currency has given up much of these gains on Thursday. GBP/USD responded with losses after a dismal British CBI Realized Sales report. The soft reading, which was the sharpest drop since March 2009, was all the more surprising because the September reading showed a strong gain of 42 points. High inflation is likely having a chilling effect on consumer spending, a key driver of economic growth. The BoE will be taking note of the sharp drop in retail sales, as the Bank must decide at the November 2 meeting whether to raise rates for the first time in a decade. Policymakers remain divided over a rate hike, which would be the first in a decade. Proponents of a rate increase point to inflation running at 3.0%, above the Bank’s target of 2.0%, but opponents argue that the economy is showing signs of weakness and a rate hike could hamper economic growth.

It’s report card day for the US economy on Friday, with the release of Advance GDP. The markets are forecasting a gain of 2.5%, after Preliminary GDP posted a sharp gain of 3.0%. US economic numbers remain strong, and the labor market is close to capacity. At the same time, inflation has not moved higher, and wage growth has been weaker than expected. Despite the lack of inflation, the odds of a December rate hike have soared in recent weeks, with the odds of a rate raise at 96%, according to CME FedWatch.

 

GBP/USD Fundamentals

Thursday (October 26)

  • 6:00 British CBI Realized Sales. Estimate +14. Actual -36
  • 8:30 US Unemployment Claims. 235K. Actual 233K
  • 8:30 US Goods Trade Balance. Estimate -63.8B. Actual -64.1B
  • 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%. Actual 0.3%
  • 10:00 US Pending Home Sales. Estimate 0.2%. Actual 0.0%
  • 10:30 US Natural Gas Storage. Estimate 61B. Actual 64B

Friday (October 27)

  • 8:30 US Advance GDP. Estimate 2.5%
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 100.7

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, October 26, 2017

GBP/USD October 26 at 11:40 EDT

Open: 1.3263 High: 1.3280 Low: 1.3171 Close: 1.3176

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2904 1.3022 1.3122 1.3224 1.3347 1.3444

GBP/USD was flat in the Asian session. The pair posted losses in European trade and the downward trend continues in the North American session

  • 1.3122 is providing support
  • 1.3224 has switched to a resistance role following losses by GBP/USD

Further levels in both directions:

  • Below: 1.3122, 1.3022 and 1.2904
  • Above: 1.3224, 1.3347, 1.3444 and 1.3514
  • Current range: 1.3122 to 1.3224

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Thursday session. Currently, long positions have a slim majority (52%), indicative of slight trader bias towards GBP/USD continuing to rally.

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.