GBP/USD – Pound slips to 3-month low despite soft U.S. retail sales

GBP/USD has posted considerable losses on Wednesday, as the pound continues to slide. In the North American session, the pair is trading at 1.2845, down 0.47% on the day. On the release front, there are no British events. In the U.S., consumer spending numbers disappointed, as retail sales and core retail sales both missed expectations. On Thursday, the U.S. releases three key indicators – building permits, unemployment claims and the Philly Fed Manufacturing Index.

U.S. retail sales in April were weaker than forecast, but this didn’t help the struggling pound. The currency has lost 1.2% this week and is trading at its lowest level since mid-February. Retail sales declined 0.2%, after a strong gain of 1.6% in March. Core retail sales posted a small gain of 0.1%, much lower than the estimate of 0.7%.

Brexit has been on the backburner for several weeks, but will be back on center stage in early June. Parliament is expected to vote yet again on a Brexit withdrawal agreement, after three previous attempts by the May government ended in failure. It’s difficult to see why the result will be any different this time around, as Conservative lawmakers remain deeply divided on Brexit. May tried to enlist the help of Labor leader Jeremy Corbyn, but these talks have been unproductive. The next Brexit vote in parliament will be May’s last chance before the summer recess, and her days as prime minister may be numbered.

The pound remains under pressure, and the uncertainty surrounding Brexit and global trade tensions are making fund managers increasingly pessimistic over the pound. Major financial services companies are reducing their exposure to the pound, with some going further and shorting the currency. The May government has been unable to produce a clear roadmap for departing the EU, and a no-deal remains a possibility, although both the EU and Britain are in agreement that a no-deal exit would be disastrous. Given the turmoil over Brexit, the pound is likely to face further headwinds in the coming weeks.

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GBP/USD Fundamentals

Wednesday (May 15)

• 8:30 US Core Retail Sales. Estimate 0.7%. Actual 0.1%
  
• 8:30 US Retail Sales. Estimate 0.2%. Actual -0.2%
  
• 8:30 US Empire State Manufacturing Index. Estimate 8.2. Actual 17.8
• 9:15 US Capacity Utilization Rate. Estimate 78.7%. Actual 77.9%
• 9:15 US Industrial Production. Estimate 0.0%. Actual 0.5%
• 9:30 US FOMC Member Quarles Speaks
• 10:00 US Business Inventories. Estimate 0.0%. Actual 0.0%
  
• 10:00 US NAHB Housing Market Index. Estimate 64. Actual 66
  
• 10:30 US Crude Oil Inventories. Estimate 0.0M
• 16:00 US TIC Long-Term Purchases. Estimate 36.3B

Thursday (May 16)

• 8:30 US Building Permits. Estimate 1.29M
• 8:30 US Unemployment Claims. Estimate 220K
• 8:30 US Philly Fed Manufacturing Index. Estimate 10.0
• 8:30 US Housing Starts. Estimate 1.21M

*All release times are DST

*Key events are in bold

GBP/USD for Wednesday, May 15, 2019

GBP/USD May 15 at 10:25 DST

Open: 1.2905 High: 1.2923 Low: 1.2844 Close: 1.2845

GBP/USD Technical

GBP/USD was mostly flat in the Asian session. The pair edged lower late in the European trade and the downward trend has continued in North American session

• 1.2841 is a weak support level. It could break in the North American session
• 1.2910 is the next resistance line
• Current range: 1.2845 to 1.2910

Further levels in both directions:

• Below: 1.2841, 1.2730 and 1.2615
• Above: 1.2910, 1.3000, 1.3070 and 1.3170

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