GBP/USD – British Pound Edges Higher as Retail Sales Sparkle

The British pound has posted slight losses in the Thursday session. In North American trade, GBP/USD is trading at 1.3377, up 0.21% on the day. On the release front, British Retail Sales posted a strong gain of 1.6%, crushing the estimate of 0.8%. Over in the US, unemployment claims jumped to 234 thousand, its highest level in seven weeks. As well, Existing Home Sales dropped to 5.42 million, well off the estimate of 5.56 million. Friday will be busy, with key releases on both sides of the pond. The UK releases Second Estimate GDP and Preliminary Business Investment. In the US, we’ll get a look at durable goods orders and consumer confidence.

The Federal Reserve released the minutes from its May meeting. In the minutes, some Fed policymakers said they favored removing the phrase that “the stance of monetary policy remains accommodative”. Not surprisingly, the minutes didn’t shed light on the Fed’s plans, saying that another rate hike would occur “soon”, on the assumption that the US economy continues to perform as expected. Still, a quarter-point rate hike in August is virtually a given, with the CME Group setting the odds of a hike at 95 percent. This would mark a second hike in 2018. After that? The Fed projection remains at three rates hikes in 2018, but some analysts are predicting four increases this year.

Just a few weeks ago, there was a strong likelihood that the Bank of England would raise interest rates at the May policy meeting. However, a spate of weak economic releases and falling inflation resulted in policymakers standing pat, leaving rates at 0.50%. Are we in for a repeat performance in August? Inflation levels continue to drop, with April CPI falling to 2.4%, down from 2.5% a month earlier. If Friday’s GDP report misses expectations, an August rate hike will be in serious doubt. Earlier in the week, the markets priced in an August hike at 50%, but this dropped to just 33% after Wednesday’s weak inflation data. The pound is also under pressure, and the downward spiral is likely to continue if this week’s indicators do not perform well.

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GBP/USD Fundamentals

Thursday (May 24)

• 4:00 BOE Governor Mark Carney Speaks
• 4:15 US FOMC Member William Dudley Speaks
• 4:30 British Retail Sales. Estimate 0.8%. Actual 1.6%
• 8:30 US Unemployment Claims. Estimate 220K. Actual 234K
• 10:00 US Existing Home Sales. Estimate 5.56M. Actual 5.42M
• 10:30 US Natural Gas Storage. Estimate 92B. Actual 91B
• 10:35 US FOMC Member Rafael Bostic Speaks
• 13:00 BOE Governor Mark Carney Speaks

Friday (May 25)

• 4:30 British Second Estimate GDP. Estimate 0.1%
• 4;30 British Preliminary Business Investment. Estimate 0.2%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Durable Goods Orders. Estimate -1.3%
• 9:20 BoE Governor Carney Speaks
• 9:20 US Fed Chair Powell Speaks
• 10:00 US Revised UoM Consumer Sentiment. Estimate 98.8
• 10:00 US Revised UoM Inflation Expectations

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, May 24, 2018

GBP/USD May 24 at 11:45 DST

Open: 1.3349 High: 1.3422 Low: 1.3343 Close: 1.3377

GBP/USD Technical

GBP/USD edged higher in the Asian session. The pair posted gains in European trade but has given up most of these gains in the North American session

• 1.3301 is providing support
• 1.3402 was tested earlier in resistance. It remains a weak line
• Current range: 1.3301 to 1.3402

Further levels in both directions:

• Below: 1.3301, 1.3186 and 1.3059
• Above: 1.3402, 1.3494, 1.3613 and 1.3712

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement in the Thursday session. Currently, long positions have a majority (62%), indicative of trader bias towards GBP/USD continuing to head upwards.

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.USD/JPY