GBP/USD – British pound plunges as May under attack over Brexit deal

GBP/USD is down sharply in the Thursday session, as the turmoil over Brexit has weighed heavily on the British pound. In North American trade, the pair is trading at 1.2758, down 1.77% on the day. On the release front, British retail sales declined -0.5%, well below the estimate of 0.2%. In the U.S., it’s a busy day. Retail sales rebounded with a strong gain of 0.7% in October, after a decline of -0.1% a month earlier. Core retail sales jumped 0.8%, after a gain of 0.1% in September. Elsewhere, the Philly Fed Manufacturing Index fell sharply to 12.9, shy of the estimate of 20.1 points. Unemployment claims edged higher to 216 thousand, above the estimate of 213 thousand. This was the highest reading since August. On Friday, the U.K releases CB Leading Index.

It has been a day of drama in London, as an embattled Prime Minister May attempts to sell the Brexit agreement between Britain and the European Union. It promises to be an uphill battle for May, as many Conservative MPs are against the agreement, particularly over the proposed customs agreement with the EU. Brexit Secretary Dominic Raab resigned on Tuesday, and there were calls from some Conservative MPs for a no-confidence vote against May. With Labor vowing to shoot down the agreement, May will have a tough time getting a majority in parliament for the agreement. The EU announced that a special summit on Brexit on November 25, but the markets remained concerned that a ‘no-deal’ scenario is a real possibility. This negative sentiment has sent the pound reeling, with GBP/USD posting its sharpest one-day loss of 2018.

Overshadowed by the political drama in Westminster was a dismal reading from British retail sales. The indicator came in at -0.5%, its second straight decline. Consumers are nervous about Brexit and are holding tighter to their purse strings. As well, the mild autumn weather has put a damper on sales of winter clothes. The dismal retail sales release could dampen consumer and investor confidence, which could push the wobbly pound even lower.

On Wednesday, U.S consumer inflation numbers beat their estimates for October. The consumer price index posted a gain of 0.3%, its strongest gain since January. Core CPI, which excludes food and energy prices edged higher to 0.2%, marking a 3-month high. Both releases were in line with forecasts. Core CPI was 2.1% higher than a year ago, and this solid release means that the Fed remains on track to continue raising interest rates. The Federal Reserve holds its next policy meeting in December, with the odds of a December rate hike at 72%, according to the CME Group.

European open – Brexit deal, Italy budget and oil

Sterling braces for wild moves after cabinet meeting

Pound plummets on Brexit resignations

GBP/USD Fundamentals

Thursday (November 15)

• 4:30 British Retail Sales. Estimate 0.2%. Actual -0.5%
• 8:00 British MPC Member Tenreyro Speaks
• 8:30 US Core Retail Sales. Estimate 0.5%. Actual 0.7%
• 8:30 US Retail Sales. Estimate 0.6%. Actual 0.8%
• 8:30 US Philly Fed Manufacturing Index. Estimate 20.1. Actual 12.9
• 8:30 US Empire State Manufacturing Index. Estimate 19.9. Actual 23.3
• 8:30 US Import Prices. Estimate 0.1%. Actual 0.5%
• 8:30 US Unemployment Claims. Estimate 213K. Actual 216K
• 10:00 US FOMC Member Quarles Speaks
• 10:00 US Business Inventories. Estimate 0.3%. Actual 0.3%
• 10:30 US Natural Gas Storage. Estimate 35B
• 11:00 US Crude Oil Inventories. Estimate 2.9M
• 11:30 US Fed Chair Powell Speaks
• 13:00 US FOMC Member Bostic Speaks

Friday (November 16)

• 9:30 British CB Leading Index

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, November 15, 2018

GBP/USD November 15 at 11:10 EST

Open: 1.2990 High: 1.3031 Low: 1.2751 Close: 1.2759

GBP/USD Technical

GBP/USD has broken through two support levels on Thursday. The pair was flat in the Asian session and posted very sharp losses in European trade. GBP/USD is flat in North American trade

• 1.2706 is providing support
• 1.2812 is the next resistance line
• Current range: 1.2706 to 1.2812

Further levels in both directions:

• Below: 1.2706, 1.2589 and 1.2488
• Above: 1.2812, 1.2915, 1.3048 and 1.3173

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