The British pound has reversed directions in the Friday session and headed lower. Currently, GBP/USD is trading at 1.3671, down 0.43% on the day. It was shaping up to be a strong week for sterling, which had spent most of the week in positive territory. Still, even with Friday’s losses, the pair is up 0.70% on the week.
Retail sales, PMI disappoint
It is a busy end to the week for British fundamentals. Retail Sales was a major disappointment in December, with a negligible gain of just 0.3%. This was well below the street consensus of 1.4%. Still, it does indicate a recovery after a dismal read of -3.8% in November, which marked the worst showing since April, when Retail Sales plunged 18.1 percent as Covid-19 shuttered the economy.
In both the services and manufacturing sectors, PMI reports weakened in January. Manufacturing remained in expansionary territory, but the PMI dropped sharply from 57.3 to 52.9 points and missed the estimate of 53.5. It was the weakest reading since May. Services PMI showed an even sharper decline, dropping from 49.9 to 38.8 and missing the forecast of 45.2. This shows a sharp contraction in services and was the lowest reading since April. The soft Services PMI release is a grim reminder that the current lockdown in the UK continues to take a heavy toll on the domestic economic activity, in particular, the services industry.
In the US, it was back to the release front after a break for Joe Biden’s inauguration. The numbers were positive, as the Philly Fed Manufacturing Index improved sharply from 11.1 to 26.5 and easily beat the forecast. As well, Unemployment Claims fell to 900 thousand and beat the estimate of 930 thousand.
- GBP/USD is putting strong pressure on resistance at 1.3657. Close by, there is resistance at 1.3677
- There is support at 1.3597, followed by support at 1.3555
- The pair is slightly above the 20-day MA line at 1.3610. A daily close below this line is a bearish technical signal
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