GBP/USD – UK Retail Sales Disappoints, but Pound Remains Steady

GBP/USD is steady in Thursday trading, after posting sharp gains on Wednesday. The pair was trading just above the 1.52 line in the North American session. Looking at economic releases, UK Retail Sales posted a weak gain, but this was enough to match the estimate. In Washington, US Federal Reserve chair Bernard Bernanke is testifying before a senate committee. US releases looked sharp on Thursday. Unemployment Claims came in well below the forecast, and the Philly Fed Manufacturing Index impressed with its best showing in over two years.

There was plenty of anticipation ahead of US Federal Reserve chair Bernard Bernanke’s testimony in Washington on Wednesday, but anyone hoping for drama and fireworks out of Capitol Hill was sorely disappointed. In his testimony, Bernanke basically served the same menu we’ve seen before with regard to QE. The Fed chief sounded extremely vague when he stated that the Fed bond-buying was “not on a preset course”, leaving the Fed plenty of wiggle room to scale down QE should it choose to do so. Bernanke reiterated that any decision to scale down QE would depend on improving economic conditions. He noted that present unemployment levels (7.6%) were “well above” normal levels, and was careful not to be pinned down by any deadlines for scaling down QE. So the message from the Fed to the markets seems to be that QE tapering is not on the table before the economy improves and unemployment falls. Bernanke will continue his testimony before a Senate committee on Thursday, and it’s unlikely we’ll hear anything new.

The UK released a host of inflation indicators on Wednesday, and most matched the forecast. CPI, the most important inflation index, climbed from 2.7% to 2.9%, but still remained below the estimate of 3.0%. The Bank of England recently commented on high inflation in the British economy, noting that it might have to adjust its target of 2.0% to a higher level.

The BOE released the breakdown of how policymakers voted on the interest rate and asset purchase facility (APF) decisions. The votes for both carried with 9-0 unanimous decisions. This was expected with the vote on the key interest rate, but the APF vote was a surprise, as the markets had expected another split vote. In recent decisions, former BOE Governor Mervyn King found himself in the minority which voted to increase APF. This past meeting was the first under new governor Mark Carney, who not only voted against any changes to APF, but convinced all the other policymakers to vote with him. The vote underscores that Carney may run things differently than King, and the market reaction to Carney’s new leadership could impact on the pound.

GBP/USD for Thursday, July 18, 2013

GBP/USD July 18 at 15:15 GMT

GBP/USD 1.5202 H: 1.5242 L: 1.5158

GBP/USD Technical

GBP/USD is trading just above the 1.52 line. The pair lost ground late in the Asian session, dropping to a low of 1.5162. It rebounded in European trading, touching a high of 1.5242, before retracting. On the upside, the pair is currently putting pressure on 1.5203, and we could see this line break again if the pound pushes higher. There is stronger resistance at 1.5309. On the downside, the pair continues to receive support at 1.5111. This is followed by the round number of 1.5000, which saw action last week.

• Current range: 1.5111 to 1.5203

Further levels in both directions:

• Below: 1.5111, 1.5000, 1.4896, 1.4781, 1.4690 and 1.4465
• Above: 1.5203, 1.5309, 1.5432 and 1.5527

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little change in Thursday trading, continuing a trend we have seen since Tuesday. This is reflected in what we are seeing from the pair, which has been unable to break away from the 1.52 line. The ratio has a large majority of long positions, indicating that trader sentiment is strongly biased towards the pound pushing higher against the dollar.

The pound got a boost from some very strong UK employment numbers on Wednesday. GBP/USD did not react to Thursday’s strong employment and manufacturing numbers out of the US, so it could be a fairly quiet day for the pair.

GBP/USD Fundamentals

• 8:30 British Retail Sales. Estimate 0.2%. Actual 0.2%.
• 12:30 US Unemployment Claims. Estimate 344K. Actual 334K.
• 14:00 US Philly Fed Manufacturing Index. Estimate 8.5 points. Actual 19.8 points.
• 14:00 US CB Leading Index. Estimate 0.3%. Actual 0.0%
• 14:30 US Fed Chairman Bernard Bernanke Speaks. Bernanke will testify before the Senate Banking Committee in Washington.
• 14:30 US Natural Gas Storage. Estimate 63B.

*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.