GBP/USD lower after strong US Mfg. PMI rises

The British pound continues to drift this week. In the North American session, GBP/USD is trading at 1.3103, down 0.33% on the day.

UK BRC retail sales jump

The British Retail Consortium reported a strong gain in retail sales for August. Retail sales rose 0.8% y/y, up from 0.3% in July to the highest level in five months. Food and clothing sales picked up as people took advantage of the warm summer weather. Still, consumer confidence remains fragile and consumers remain cautious about discretionary spending.

The jump in retail sales could be a precursor of what to expect from the official retail sales report on Sept. 20. Retail sales rebounded in July with a gain of 1.4% y/y, up sharply from a revised 0.3% decline a month earlier.

In the US, it was back to work today after the Labor Day holiday. The ISM Manufacturing PMI rose slightly to 47.2, up from 46.8 but shy of the market estimate of 47.5. Manufacturing has been in deep freeze for most of the past 18 months, as the services sector has carried the US economy.

Investors are keeping a close eye on this week’s employment report, specifically the August nonfarm payrolls. The July reading of 114,000 was much lower than expected and the lowest reading in over three years. Investors panicked about the health of the US economy and the financial markets plunged but managed to recover quickly.

The markets are understandably nervous ahead of the jobs report, although the market estimate for nonfarm payrolls stands at 160,000, which would mark an improvement from July. If the release is within expectations, it should cement a 25-basis point cut from the Federal Reserve later this month. Another soft reading, however, could cause panic in the markets and put pressure on the Fed to deliver a 50-bps cut at the meeting.

GBP/USD Technical

•  There is resistance at 1.3167 and 1.3225
• 1.3069 and 1.3011 are providing support

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