GBP/USD – Pound Gains As Retail Sales Sparkles

The British pound has posted gains on Wednesday, as GBP/USD trades close to the 1.69 line in Wednesday’s North American session. On the release front, Retail Sales bounced up sharply in April, easily beating the estimate.  There were no surprises from the BOE, as the MPC votes on maintain the benchmark interest rate and the asset-purchase program were both unanimous. In the US, the Federal Reserve releases its policy meeting minutes, and Fed chair Janet Yellen speaks at a university commencement in New York.

Retail Sales is the primary gauge of consumer spending and one of the most important economic indicators. The indicator delivered the goods in April, rebounding with a gain of 1.3%, crushing the estimate of 0.4%. With the British economy showing marked improvement and speculation swirling about a rate increase from the BOE, British inflation indicators are being closely scrutinized. On Tuesday, CPI, the primary gauge of consumer spending, put an end to a downward skid which we’ve seen since mid-2013. The index improved to 1.8% in April, edging above the estimate of 1.7%. This figure is close to the BOE’s inflation target of 2.0%. Meanwhile, PPI Input posted a fourth consecutive decline, with a reading of -1.1%. This was well off the estimate of 0.0%.

The spotlight will be on the Federal Reserve on Wednesday, with the release of the minutes of the most recent policy meeting. The Fed has been steadily trimming its asset purchase program since December, and is expected to wind up the program before the end of 2014, provided that the economy does not take a downward spin. Since 2008, the benchmark interest rate has been close to zero, and no increases are expected before mid-2015. The pace of future increases will likely be slow to allow for a smooth adjustment from the economy and the financial markets.

In the US, key indicators have been generally strong, and last week ended with encouraging housing numbers. Building Permits jumped to 1.08 million, well above the estimate of 1.01 million. This was the highest level we’ve seen since December 2006. Housing Starts continues to move higher and climbed to 1.07M, compared to the estimate of 0.98M. This marked a five-month high. Meanwhile, UoM Consumer Sentiment dipped to 81.8 points, short of the estimate of 84.7 points.

GBP/USD for Wednesday, May 21, 2014

GBP/USD May 21 at 15:25 GMT

GBP/USD 1.6870 H: 1.6920 L: 1.6832

GBP/USD Technical

• GBP/USD has moved higher in Wednesday trade. The pair dipped touched a high of 1.6920 early in the European session, but was unable to consolidate and retracted.
• On the upside, 1.6896 remains a weak resistance line. The key level of 1.70 is stronger.
• 1.6765 has strengthened in support as the pound continues to move higher. The next support level is at 1.6705.

Further levels in both directions:

• Below: 1.6765, 1.6705, 1.6549 and 1.6436
• Above: 1.6896, 1.70, 1.7210, 1.7374 and 1.7538

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions in Wednesday trade, reversing the direction seen a day earlier. This is not consistent with the movement of the pair, as the pound has moved higher. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing direction and moving higher against the pound.

GBP/USD has posted more gains on Wednesday. The pair has edged lower in the North American session.

GBP/USD Fundamentals

• 8:30 British MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9.
• 8:30 British Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9.
• 8:30 British Retail Sales. Estimate 0.4%. Actual 1.3%.
• 14:00 US FOMC Member William Dudley Speaks.
• 14:30 US Crude Oil Inventories. Estimate -0.1M. Actual -7.2M.
• 15:30 US Federal Reserve Chair Janet Yellen Speaks.
• 17:30 US FOMC Member Narayana Kocherlakota Speaks.
• 18:00 US FOMC Meeting Minutes.

*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.