Pound Sterling reclaims 1.2900 on a slew of upbeat UK data

Most recent article: Pound Sterling trades mixed in key pairs at start of new week

The Pound Sterling exhibits sheer strength against the US Dollar on multiple tailwinds.
Healthy growth in UK Retail Sales could diminish bets of a second straight BoE interest-rate cut.
The US Dollar struggles to hold onto Thursday's recovery, which was driven by upbeat economic data.

The Pound Sterling (GBP) outperforms its major peers in Friday’s New York session. The British currency gains significantly as the United Kingdom (UK) Office for National Statistics (ONS) has reported that Retail Sales rebounded in July, as expected, after contracting sharply in June.

The report showed that monthly and annual Retail Sales rose by 0.5% and 1.4%, respectively. As per the report, sales receipts at department stores and sports equipment stores grew strongly, with retailers suggesting that summer discounting and sporting events such as the European Football Championship boosted sales. On the contrary, demand for automotive fuel contracted sharply.

Retail Sales are a key measure of consumer spending. Strong demand from consumers tends to fuel inflationary pressures in the economy, so the data could dampen expectations that the Bank of England (BoE) will opt for another interest-rate cut in September. The BoE started reducing its key borrowing rates in the first week of August, but the rate-cut move was a tough call, with a 5-4 vote split.

BoE’s next monetary policy meeting in September could also be a tough call. Inflation in the UK service sector declined sharply in July due to slowing wage growth momentum. However, the latest labor market data also showed that the Unemployment Rate surprisingly fell and that the economy is clearly on an expansion path.

Daily digest market movers: Pound Sterling refreshes three-week high against US Dollar

The Pound Sterling surges to near the round-level resistance of 1.2900 against the US Dollar (USD). The GBP/USD pair strengthens as the US Dollar falls in Friday’s North American trading hours after a sharp recovery on Thursday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slumps below 103.00 after failing to hold the recovery from a 10-day low of 102.27 on Thursday.
The recovery move in the US Dollar was prompted by robust growth in United States (US) monthly Retail Sales for July and lower-than-expected weekly Jobless Claims. Upbeat US data diminishes fears of a recession, dashing expectations for an aggressive policy/easing response from the Federal Reserve (Fed) in September.
According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that the likelihood of 50 basis points (bps) interest-rate reduction has diminished to 29.5% from the 51% recorded a week ago. Even though market speculation for large rate cuts has significantly eased, expectations for a dovish decision in September remain firm.
A lower number of US individuals claiming jobless benefits for the first time consecutively for two weeks suggests that labor market conditions are not as bad as shown by the Nonfarm Payrolls (NFP) data for July. The official Employment data showed soft labor demand and a significant rise in the Unemployment Rate.
Meanwhile, Fed policymakers are also signaling they are comfortable with interest-rate cut expectations. On Thursday, St. Louis Federal Reserve President Alberto Musalem said: "The time may be nearing when an adjustment to a moderately restrictive policy may be appropriate." When asked about current labor market conditions, he said that "the labor market is no longer overheated."

Pound Sterling Price Today:

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.19%	-0.43%	-0.84%	0.00%	-0.28%	-0.57%	-0.56%
EUR	0.19%		-0.24%	-0.67%	0.17%	-0.12%	-0.51%	-0.35%
GBP	0.43%	0.24%		-0.42%	0.43%	0.13%	-0.25%	-0.11%
JPY	0.84%	0.67%	0.42%		0.91%	0.56%	0.17%	0.30%
CAD	-0.00%	-0.17%	-0.43%	-0.91%		-0.30%	-0.71%	-0.55%
AUD	0.28%	0.12%	-0.13%	-0.56%	0.30%		-0.39%	-0.27%
NZD	0.57%	0.51%	0.25%	-0.17%	0.71%	0.39%		0.15%
CHF	0.56%	0.35%	0.11%	-0.30%	0.55%	0.27%	-0.15%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Technical Forecast: Pound Sterling aims to stabilize above 1.2900

The Pound Sterling jumps to near 1.2900 against the US Dollar. The GBP/USD pair extends an upside trend that started from a six-week low of 1.2665 after a positive divergence formation on a daily time frame, in which the pair continues to build higher lows while the momentum oscillator makes lower lows. This generally results in a resumption of the uptrend, but it should be confirmed with more indicators.

The 14-day Relative Strength Index (RSI) recovers after finding a cushion near 40.00, exhibiting signs of buying interest.

On the upside, the psychological figure of 1.3000 and the annual high at 1.3044 will act as major resistances for the Pound Sterling. Alternatively, the recovery move could falter if the asset breaks below the August 8 low at 1.2665. This would expose the asset to the June 27 low at 1.2613, followed by the April 29 high at 1.2570.

Economic Indicator

Retail Sales (MoM)

The Retail Sales data, released by the US Census Bureau on a monthly basis, measures the value in total receipts of retail and food stores in the United States. Monthly percent changes reflect the rate of changes in such sales. A stratified random sampling method is used to select approximately 4,800 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms across the country. The data is adjusted for seasonal variations as well as holiday and trading-day differences, but not for price changes. Retail Sales data is widely followed as an indicator of consumer spending, which is a major driver of the US economy. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Retail Sales data published by the US Census Bureau is a leading indicator that gives important information about consumer spending, which has a significant impact on the GDP. Although strong sales figures are likely to boost the USD, external factors, such as weather conditions, could distort the data and paint a misleading picture. In addition to the headline data, changes in the Retail Sales Control Group could trigger a market reaction as it is used to prepare the estimates of Personal Consumption Expenditures for most goods.

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