GBP/USD – Pound slips to 4-week low on inflation, Brexit blues

GBP/USD has dropped considerably in the Thursday session. In North American trade, the pair is trading at 1.2799, down 0.38% on the day. On the release front, there are no major British events. It was a busy day in the U.S., marked by disappointing data. Retail sales fell 1.2% and core retail sales plunged 1.8%. PPI declined 0.1% and unemployment claims jumped to 239 thousand, well above the estimate of 225 thousand. On Friday, the U.K. publishes retail sales and the U.S. releases UoM consumer sentiment.

British CPI slowed to 1.8% in January, falling below the 2.0% level for the first time since January 2017. Inflation has now dropped for three successive months, pointing to weakness in the British economy. This was underscored by soft GDP data earlier in the week. GDP for Q4 slowed to 0.2%, and the monthly GDP reading for December has raised alarm bells, with a decline of 0.4%. The British pound is down 1.8% in February, as nervous investors shake their heads at the turmoil surrounding Brexit. Prime Minister May and her European counterparts have all said they don’t want to see Britain crash out of the EU without a deal, but that seems to be the extent of any consensus.

Inflation levels in the U.S. remain low, despite a strong U.S. economy and strong labor market. CPI showed no change in January, and has failed to post a gain since November. Core CPI has recorded weak gains of 0.2% for four successive months. On an annualized basis, CPI gained 1.6% in January, the weakest year-over-year gain since mid-2017. The soft inflation numbers were a result of low energy prices, which fell 3.1% in January as oil prices remain under pressure.

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GBP/USD Fundamentals

Thursday (February 14)

• 4:30 British MPC Member Vlieghe Speaks
• 5:41 British 10-year Bond Auction. Actual 1.16/2.1
• 8:30 US Core Retail Sales. Estimate 0.0%. Actual -1.8%
  
• 8:30 US Retail Sales. Estimate 0.1%. Actual -1.2%
  
• 8:30 US PPI. Estimate 0.1%. Actual -0.1%
  
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.3%
  
• 8:30 US Unemployment Claims. Estimate 225K. Actual 239K
  
• 10:00 US Business Inventories. Estimate 0.3%. Actual -0.1%
• Tentative – US Mortgage Delinquencies
• 10:30 US Natural Gas Storage. Estimate -79B. Actual -78B

Friday (February 15)

• 4:30 British Retail Sales. Estimate 0.2%
• 8:30 US Empire State Manufacturing Index. Estimate 7.1

*All release times are EST

*Key events are in bold

GBP/USD for Thursday, February 14, 2019

GBP/USD February 14 at 12:05 EST

Open: 1.2846 High: 1.2878 Low: 1.2773 Close: 1.2799

GBP/USD Technical

GBP/USD was mostly flat in the Asian session. The pair posted slight losses in European trade but then recovered. GBP/USD has posted small losses in North American trade

• 1.2729 is providing support
• 1.2851 is the next resistance line
• Current range: 1.2729 to 1.2851

Further levels in both directions:

• Below: 1.2729, 1.2615 and 1.2477
• Above: 1.2851, 1.2910, 1.3070, 1.3170

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