No surprise in UK retail sales: they dropped by 0.5% as expected. However, the markets were front running the publication with a move higher of GBP/USD. We are now seeing a “sell the fact†reaction. The volume of retail sales in the UK was expected to drop by 0.5% in May after a surprising jump of 1.3% in April.
GBP/USD already made a move upwards before the release, enjoying the weakness of the US dollar following the FOMC meeting last night. It peaked at 1.7024 just before the data hit the newswires. Update: GBP/USD rises back above 1.70.
Earlier in the week, UK inflation fell short of expectations with only 1.5%. The MPC meeting minutes were unanimous and left markets wondering, as there were both hawkish and dovish comments.
It seems that the Bank of England wants markets to think that a rate hike in 2014 is still on the cards. As always, it depends on the data.
Later on today we have the CBI Industrial Order Expectations in the UK, followed by the US weekly jobless claims and the Philly Fed Manufacturing Index.
1.70 is a clear separator of ranges. It is immediate support. 1.6940 follows. On the topside, the historic post crisis high of 1.7042 is key resistance. Beyond this line, it is back to levels last seen in 2008.
For more, see the GBPUSD forecast.
