GBP higher, retail sales and PMIs next

The British pound is in positive territory on Thursday. In North American trade, the pair is trading at 1.4181, up 0.47% on the day.

The UK will deliver some key data on Friday. The highlight will be Retail Sales (6:00 GMT). Analysts expect a strong gain of 4.5% for April, after a sharp gain of 5.4% in March. This will be followed by manufacturing and services PMIs, with a consensus of 60.7 and 62.2, respectively. These estimates all point to strong growth, as the UK economy continues to improve as health restrictions are being eased.

Inflation has become the hot topic of discussion in the market after US inflation numbers surged last week. With the British economy reopening, it comes as no surprise that inflationary pressures in the UK are on the rise. Still, the BoE has not given any indications that it plans to veer from its ultra-accommodative policy. The BoE recently decreased its weekly bond purchases, while insisting that this was not a tightening of policy.

Let the taper debate begin (soon)

The FOMC minutes from the April policy meeting caught the markets off guard. The minutes stated that Fed policymakers were open to begin considering a taper of bond purchases over the upcoming meetings. The admission that the Fed is open to tapering was in contradistinction to the message that the Fed has been drumming out for months, which was that the Fed had no plans to taper its massive QE programme for the foreseeable future.

This development sent equities lower and pushed the US dollar higher, on fears that the Fed could begin to tighten policy as early as next month. Now that the FOMC has opened the door to a taper talk, there is the risk of the markets responding with a taper tantrum.

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GBP/USD Technical Analysis

• GBP/USD is testing resistance at 1.4180, which has been relevant for much of the week. Above, there is resistance at 1.4262
• There are support lines at 1.4003 and 1.3908

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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