GBP/USD – Strong UK Retail Sales Boosts Pound

The British pound continues to move higher against the US dollar, as it has throughout the week. GBP/USD is trading above the 1.66 line in the North American session. On the release front, British Retail Sales bounced back in February with a strong gain. In the US, Unemployment Claims continue to drop, but Pending Home Sales disappointed with its second decline in three readings.

US Unemployment Claims continues to impress. The key indicator dropped to 311 thousand, its lowest level in over three months. The estimate was 326 thousand, marking the fourth straight week that the reading has come in below the forecast. The news was not as good from Pending Home Sales, with a reading of -0.8%. This disappointed the markets, which had expected a small gain of 0.1%. Earlier in the week, New Home Sales also lost ground in February, and concern is bound to increase about the health of the US housing industry.

In the UK, Retail Sales posted a solid gain of 1.7%, bouncing back after a decline of 1.5% in January. The reading easily beat the estimate of 0.5%. This key indicator is the primary gauge of consumer spending, which is a key component of economic growth. The pound responded to the release with more gains, and the currency has gained about 150 points in the past week against the dollar.

Ukraine’s economy is in shambles as a result of the four-month political crisis. Prime Minister Arseniy Yatsenyuk acknowledged that the country is on the edge of bankruptcy, and GDP could drop by 3% this year. However, help is on the way. The IMF is set to sign a two-year loan of up to $18 billion, and the EU has offered a package of EUR 11 billion. Ukraine has already received two bailouts from the IMF since 2008, and will have to implement budget cuts and other measures in order to receive the new package from the IMF.

GBP/USD for Thursday, March 27, 2014

GBP/USD March 27 at 16:40 GMT

GBP/USD 1.6616 H: 1.6647 L: 1.6556

GBP/USD Technical

• GBP/USD has posted gains on Thursday. The pair barreled above the 1.66 line early in the European session.
• On the downside, 1.6549 has some breathing room as the pound continues to move upwards. This is followed by strong support at 1.6416.
• 1.6705 is a strong resistance line.
• Current range: 1.6549 to 1.6705.

Further levels in both directions:

• Below: 1.6549, 1.6416, 1.6329, 1.6236 and 1.6146
• Above: 1.6705, 1.6765, 1.6896 and 1.6964

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Thursday, continuing the direction we saw a day earlier. This is not consistent with what we are seeing from the pair, as the pound continues to post gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing its current downward trend.

The pound is trading above the 1.66 line. GBP/USD is steady in the North American session.

GBP/USD Fundamentals

• 9:30 British Retail Sales. Estimate 1.7%. Actual 0.5%.
• 12:30 US Unemployment Claims. Estimate 326K. Actual 311K.
• 12:30 US FOMC Member Sandra Pianalto Speaks.
• 12:30 US Final GDP. Estimate 2.7%. Actual 2.6%.
• 12:30 US Final GDP Price Index. Estimate 1.6%. Actual 1.6%.
• 14:00 US Pending Home Sales. Estimate +0.1%. Actual -0.8%.
• 14:30 US Natural Gas Storage. Estimate -49B. Actual -57B.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.