Recent data from the UK suggests that economic activity is firming in the region. The latest data, retail sales, is no different and yet the BOE outlook remains unchanged. GDP forecasts remain tepid, inflation outlook is weak, and the bank is not expected to raise interest rates again for some time. Despite all this the GBP is gaining strength if within near term trading ranges.
Month over month retails sales increased by 0.3% in October, better than 0.1% expected but down from the previous months 0.7%. At the core level sales increased as expected, 0.1%, and up from the previous month’s -0.6%. The more important year over year data is also better than expected but shows a substantial downturn in activity as Brexit fears persist within the population. Headline retail sales came in at -0.3% YOY, better than the -0.6% expected but down from the previous read of 1.3%. Core sales are the same, down -0.3% YOY in October, better than the -0.4% expected but down sharply from the previous read of 1.6%.
The pound was able to gain versus the euro as EU consumer level inflation data shows prices are holding steady. The headline month over month CPI came in at 0.1%, as expected, but down from the previous month. The more important YOY figure was also as expected at 1.4% and holding steady from the previous month. At the core level CPI also came in as expected and holding steady at 0.9%. The EUR/GBP moved lower on the news, confirming yesterday’s pin-bar candle and resistance at the top of the 2-month trading range. The pair is likely to continue lower in the near term with targets at 0.8900 and 0.8800.
The pound was also able to gain versus the dollar although the move was capped at resistance with the release of today’s US data. Jobless claims show continued health in US labor markets while the Philly Fed’s Manufacturing Business Outlook Survey shows improvement with the regional economy. The GBP/USD is now testing resistance at the 1.3200 level with a chance of breaking through. A break through resistance would be bullish with upside targets at 1.3300 in the near term. Even so, the pair would remain within a 2-month trading range and winding up ahead of the next round of central bank meetings.
The pound was also able to gain versus the Aussie dollar and is now moving above a long-term resistance level. Thursday’s move sets a new 6-month high, testing the 1.7400 level, and above previous resistance at the 1.7350 level.
The indicators are bullish and suggest a further move higher with target at 1.7500.
3 min
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