GBP/USD – Pound Slips as UK Retail Sales Falter

GBP/USD continues to lose ground, and the pound is struggling to stay above the 1.51 line early on in the North American session. British Retail Sales, a key indicator, had its worst performance since last May. Public Sector Net Borrowing also missed its estimate, as did CBI Industrial Order Expectations. The Bank of England released the minutes of its most recent policy meeting, and there were no surprises regarding the vote breakdown for the interest rate and asset purchase levels. 

In the US, Existing Housing Sales improved but still failed to meet the estimate. The markets are carefully monitoring the Federal Reserve, which will release the minutes of its previous policy meeting. As well, Fed Chair Bernard Bernanke testifies before a Congressional committee. The markets finally got a look at some US numbers, as Existing Home Sales was released earlier. The indicator jumped from 4.92 million to 4.97 million, but fell short of the estimate of 4.99 million.

In the UK, another weak key release meant more bad news for the struggling pound. Retail Sales posted a decline of 1.3%, way off the estimate of 0.0%. It was the second straight decline for the key indicator, and its lowest reading since last May. There were no surprises as the Bank of England released the minutes of its recent policy meeting, which showed a unanimous vote to maintain the interest rate, while there was a split with regard to quantitative easing, as three of the nine MPC members voted to increase QE. The pound has had a disastrous month of May, and the downward slide shows no sign of letting up. The British currency has now shed about four cents against the dollar since the beginning of the month and if market sentiment continues to be negative, we could soon see the pound test the all-important 1.50 level.

The Federal Reserve will be front page and center on Wednesday, as Fed Chairman Bernard Bernanke testifies before a Congressional committee and the Fed releases the minutes of the last FOMC meeting. The $64,000 question is whether the Fed will make any changes to its current round of quantitative easing, which involves the purchase of $85 billion in assets each month. There are signs that the Fed is mulling making a move, despite lukewarm US numbers of late. Last week, John Williams, president of the Federal Reserve Bank of San Francisco, stated that the Fed could begin reducing QE this summer and terminate bond buying late in 2013. As the QE program is dollar negative, any moves by the Fed to wind up QE could have a strong impact on the currency markets.  

GBP/USD for Wednesday, May 22, 2013

GBP/USD May 22 at 13:30 GMT

GBP/USD 1.5110 H: 1.5086 L: 1.5110

GBP/USD Technical

GBP/USD remains under pressure after weak UK numbers on Wednesday. The pair is testing resistance at 1.5111. We could see this line break if the pound bounces back. This is followed by resistance at 1.5203. On the downside, the pair is receiving support at 1.5047. This is the last strong resistance line before the 1.50 level.

• Current range: 1.5047 to 1.5111

Further levels in both directions:

• Below: 1.5047, 1.5000, 1.4873 and 1.4781
• Above: 1.5111, 1.5203, 1.5309, 1.5432, and 1.5524

OANDA’s Open Positions Ratio

The GBP/USD ratio has gone quiet in Wednesday trading. The pound continues to show weakness, and if the pair continues to show activity, we can expect the ratio to swing into action as well.

The pound continues to slip against the dollar, thanks to weak UK data. On Tuesday, inflation numbers sagged, while Retail Sales missed the mark on Wednesday. With the markets still waiting for Bernanke’s testimony and the release of the FOMC policy meeting, we see more volatility from the pair during the course of the day.

GBP/USD Fundamentals

• 8:30 Bank of England MPC Meeting Minutes
• 8:30 British Retail Sales. Estimate 0.0%. Actual -1.3%
• 8:30 British Public Sector Net Borrowing. Estimate 7.6B. Actual 8.0B.
• 10:00 British CBI Industrial Order Expectations. Estimate -18 points. Actual -20 points.
• 11:00 Bank of England MPC Member Charles Bean Speaks
• 14:00 US Existing Home Sales. Estimate 4.99M. Actual 4.97M
• 14:00 US Fed Chairman Bernard Bernanke testifies before Congress Joint Economic Committee
• 14:00 US Treasury Secretary Jack Lew Speaks
• 14:30 US Crude Oil Inventories. Estimate -0.4M. Actual -0.3M.
• 18:00 US FOMC Meeting Minutes

*Key releases are highlighted in bold

*All release times are GMT

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