The British pound has reversed directions on Friday and posted gains. In the European session, GDP/USD is trading at 1.3881, up 0.32% on the day.
Retail sales, PMIs boost sterling
The pound has shown considerable movement this week. The currency started the week in fine fashion, climbing 1.11%. This marked its best one-day performance since January. After pushing above the symbolic 1.40 line, the pound proceeded to retreat and fell back into 1.38 territory. On Friday, GBP/USD has gained ground, buoyed by strong economic data out of the UK.
Retail sales were outstanding in March, with a gain of 5.4% (MoM). This reflects the easing of Covid-19 restrictions on consumer spending. At the same time, retail sales for the first quarter of the year were down by 5.8% compared to Q4 of 2o2o – again, this is reflective of the lockdown that was in place for much of Q1, which curbed consumer spending. As the government continues to reopen the economy, with another easing phase scheduled for mid-May, we can expect pent-up demand to translate into robust consumer spending in the coming months.
Aside from Retail Sales, there was also positive news from the manufacturing and services sectors, which showed strong growth in March. Manufacturing PMI for March improved to 60.7, up from 58.9. It was a similar story for services, as the PMI rose from 56.3 to 60.1. Both PMIs beat the forecast of 59.0 points.
These releases show significant growth across the UK economy, but the British consumer remains quite pessimistic about economic conditions. GfK Consumer Confidence came in at -15 in April, almost unchanged from the previous reading of -15. Taking the “glass half-full” approach, this reading was the strongest since the Covid-19 pandemic began, as the index has been moving higher as the government reopens the economy.
GBP/USD Technical Analysis
- GBP/USD is putting strong pressure on resistance at 1.3898, followed by resistance at 1.3956
- There is support at 1.3726, followed by a support level at 1.3612
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