The markets were treated to plenty of volatility last week, as the pound finally ended a week on a strong note. GBP/USD climbed about 140 points, thanks to the US Federal Reserve cooling expectations for QE tapering. The US dollar was broadly weaker as a result, and the pound managed to hold onto most of these gains at the end of last week. Early in Monday’s North American session, we find GBP/USD testing the 1.51 line. On Friday, US PPI looked strong, but UoM Consumer Sentiment came in well below the estimate. On Monday, US Retail Sales and Core Retail Sales disappointed, but Empire State Manufacturing Index looked very sharp. There are no UK releases on Monday. The UK did post a single release on Sunday, as Rightmove HPI posted a gain of 0.3%, its lowest reading since November.
Over in the US, retail sales data was weak. Core Retail Sales fell from 0.3% to 0.0%, while Retail Sales slid from 0.6% to 0.4%. Both key releases fell short of their estimates. There was another strong showing from the Empire State Manufacturing Index, which jumped from 7.8 points to 9.5 points, its best level since January.
The US ended the week on a mixed note. UoM Consumer Sentiment disappointed as it missed expectations. The key indicator improved in June to 83.9 points from 82.7, but this fell well short of the estimate of 85.3 points. However, the markets appeared to focus on the fact that the indicator posted a respectable gain and remains at high levels, so the dollar was not hurt. PPI, an important inflation index, looked strong as it jumped from 0.5% to 0.8%. The estimate stood at 0.5%, and this was the best showing since October 2012.
The US dollar lost ground to the pound last week, following the release of the minutes from the Fed’s last policy meeting, as well as dovish remarks from Fed chair Bernard Bernanke. The minutes indicated that Federal Reserve policymakers remain deeply divided over when to scale down the current round of QE, whereby the Fed purchases $85 billion in assets each month. About half of the Fed policymakers favor scaling down QE before the end of 2013, while others feel that the employment market is still too fragile for the Federal Reserve to take any action. The dollar continued to lose ground as Federal Reserve chair Bernanke gave a speech in which he said that the Fed would maintain a loose monetary policy for the foreseeable future, due to low levels of inflation and a high US unemployment rate. The British currency got a badly-needed lift and managed to hold onto these gains as we begin the new trading week.
GBP/USD for Monday, July 15, 2013
GBP/USD July 15 at 15:30 GMT
GBP/USD 1.5090 H: 1.5112 L: 1.5028
GBP/USD is putting strong pressure on the 1.5111 line in Monday trading. We could see this line fall if the pound can push higher. There is stronger resistance at 1.5203. On the downside, the pair is receiving support at the important line of 1.5000. This line has some breathing with the pound trading at higher levels. The next support line is at 1.4896.
- Current range: 1.5000 to 1.5111
Further levels in both directions:
- Below: 1.5000, 1.4896, 1.4781, 1.4690, 1.4465 and 1.4346
- Above: 1.5111, 1.5203, 1.5309 and 1.5432
OANDA’s Open Positions Ratio
GBP/USD ratio is starting the week in quiet fashion, showing almost no change in Monday trading. This is reflected in the current movement of the pair, which is also subdued. The ratio has a large majority of long positions, indicating that trader sentiment is strongly biased towards the pound continuing to make inroads against the dollar.
GBP/USD is starting the week quietly, and did not show any reaction to Monday’s key US releases. However, the story could be very different on Tuesday, as both the UK and US release inflation data, highlighted by CPI data from both countries. So we could see some volatility from the pair on Tuesday.
- 12:30 US Core Retail Sales. Estimate 0.7%. Actual 0.4%.
- 12:30 US Retail Sales. Estimate 0.5%. Actual 0.0%.
- 12:30 Empire State Manufacturing Index. Estimate 5.2 points. Actual 9.5 points.
- 14:00 US Business Inventories. Estimate 0.2%. Actual 0.1%.
*Key releases are highlighted in bold
*All release times are GMT
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