At the end of last week’s trading, the GBP/USD currency pair was subjected to bearish pressure that pushed it towards the support level 1.2366, before it re-closed trading stable around 1.2445. The pressure on the pound came after British retail sales numbers disappointed hopes at the same time that the index numbers were revealed Eurozone purchasing managers reported impressive growth in the bloc's economy in April.
According to the official announcement, British retail sales fell by 0.9% on a monthly basis in March after rising by 1.1% in February according to the Office for National Statistics report, disappointing against analysts' expectations of a reading of -0.5%. The year-on-year change was -3.1%, in line with expectations, an improvement from -3.3% in February. Food store sales appeared to be a major factor in the headline numbers as volumes fell 0.7% in March 2023, after rising 0.6% in February 2023.
However, weak retail sales data is unlikely to dissuade the Bank of England from raising interest rates again in May as it tracks wages and inflation numbers that beat estimates. So the impact on the GBP is not likely to be significant as it could be considered a low level event. Commenting on this, James Smith, economist at ING, said: “The recent activity data is of little effect for the Bank of England, which remains squarely focused on inflation. And after the more-than-expected wages and consumer price index data, the bank appears to be heading for an additional 25 basis points.”
ING Bank adds that real wage growth is currently around -4% y/y, but this measure of real wages is expected to turn slightly positive by the end of the year.
From the USA, last week's US Initial Jobless Claims missed the forecast of 240K by a count of 245K. On the other hand, continuing claims for the previous week came in lower than the expected figure of 1.81 million with the tally rising to 1.865 million. The Philadelphia Fed Manufacturing Survey for February also failed to match an expected reading of -19.2 with a reading of -31.3, while US Existing Home Sales and Existing Home Sales Change missed expectations of a change of 4.5M and 1.5%, respectively. 4.44 million, a change of -2.4%.
Technical analysis of the GBP/USD pair:
- On the near term, according to the performance on the hourly chart, it appears that the GBP/USD is trading within a bullish channel formation.
- This indicates a significant short-term bullish bias in market sentiment.
- Therefore, the bulls will look forward to riding the current wave of gains towards 1.2466 or higher to the resistance 1.2484.
- On the other hand, the bears will be looking to pounce on pullbacks around 1.2420 or below at 1.2400 support.
On the long run, and according to the performance on the daily chart, it appears that the GBP/USD is trading within a bullish channel formation. This indicates a significant long-term bullish bias in market sentiment. Therefore, the bulls will target long-term profits at around 1.2542 or higher at the resistance at 1.2681. On the other hand, the bears will look to pounce on profits at around 1.2324 or below at the support at 1.2185.
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