GBP/USD – Pound Slide Continues As US Retails Sales Improve

The British pound continues to lose ground on Friday, as GBP/USD trades in the high-1.62 range in the European session. The pair has lost close to 200 points since Wednesday. In economic news, US Unemployment Claims jumped to a nine-week high, while Retail Sales and Core Retail Sales both improved in November. On Friday, we’ll get a look at US inflation numbers, with the release of PPI and Core CPI. In the lone UK release, BOE Chief Economist Spencer Dale will speak at an event in Essex.

Last week’s US employment numbers were excellent, but Thursday’s Unemployment Claims, the highest in nine weeks, dampened the party. The Fed has said that a stronger employment picture is a prerequisite to QE tapering, and the markets are prepared for the possibility of the Fed taking action at its December policy meeting. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper would likely boost the US dollar against the major currencies. Meanwhile, Retail Sales gained 0.7%, its best reading since February. Core Retail Sales posted a gain of 0.4%, up from 0.2% a month earlier.

There was some good news on the fiscal front, as the US House of Representatives easily passed a budget deal on Thursday. The agreement, which will be voted on by the Senate next week, will remove the risk of a government shutdown and reduces the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the fiscal uncertainty we’ve seen in recent months.

Over in the UK, recent solid releases point to an economy that continues to pick up steam. This was underscored by a strong reading from NIESR GDP earlier this week. This monthly indicator helps analysts track GDP, which is only released each quarter. The indicator posted gain of 0.8% in November, slightly up from the previous release of 0.7%. If British releases continue to point upwards, speculation will likely increase that the Bank of England may raise interest rates. BOE head Mark Carney has tried to dampen such sentiment, insisting that there is still plenty of slack in the economy and that the Bank has no plans to raise rates in the near future.

GBP/USD for Friday, December 13, 2013

GBP/USD December 13 at 11:50 GMT

GBP/USD 1.6279 H: 1.6360 L: 1.6271

GBP/USD Technical

• GBP/USD has posted losses on Thursday. The pound dropped below the 1.64 line late in the European session and continues to lose ground in North American trading.
• The round number of 1.6300 continues to provide support. This line has been weakening and could break if the pair’s downward slide continues. This is followed by a support level at 1.6231.
• On the upside, the pair faces resistance at 1.6476. This is followed by resistance at the round number of 1.6600, which has remained intact since August 2011.
• Current range: 1.6300 to 1.6476

Further levels in both directions:

• Below: 1.6247, 1.6125, 1.6000 and 1.5893
• Above: 1.6343, 16475, 1.66 and 1.6705

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions in Friday trading. This is reflected in the pair’s current movement, as the pound continues to lose ground to the dollar. Short positions continue to dominate the ratio, reflecting a trader bias towards the US dollar making further gains against the pound.

The pound continues to struggle against the dollar on Friday. With the US releasing key inflation data later in the day, we could see some volatility from the pair in the North American session.

GBP/USD Fundamentals

• 12:30 BOE Chief Economist Spencer Dale Speaks.
• 13:30 US PPI. Exp. 0.0%.
• 13:30 US Core CPI. Exp. 0.1%.

*Key releases are highlighted in bold

*All release times are GMT

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