Technical Bias: Bullish
- GBPUSD surges more than 100 pips to 1.5649.
- UK retail sales rises 1.2% in April, biggest gain since November.
- Mixed US data weigh on the dollar following dovish FOMC comments on Wednesday.
The GBPUSD regained its footing on Thursday following a volatile week, as the US Federal Reserve looked past June for a first rate increase while UK retail sales surprised to the upside.
The GBPUSD touched a daily high of 1.5700. It would later consolidate at 1.5649, a gain of 120 pips or 0.8 percent. Gains above 1.5700 would expose 1.5751 as the next resistance test. That level represented the high point of the post-UK election rally. On the downside, initial support is likely found at 1.5600.
The 1-hour MACD and the RSI clearly show bullish upside for the GBPUSD, which is primed to test new highs now that the US dollar is on its heels. The daily chart also confirms the bullish bias, with the RSI trending in the mid-60 region.
UK Retail Sales Rise
Warm weather boosted retail sales in April, the Office for National Statistics reported on Thursday. UK retail sales rose 1.2 percent in April, the strongest increase since November. The reading was much stronger than the 0.4 percent increase analysts had expected.
Compared to a year earlier, sales volumes were up 4.7 percent, official data showed.
Federal Reserve Looks Past June
The United States Federal Reserve will not begin raising interest rates in June, the minutes of the April Federal Open Market Committee meetings revealed on Wednesday. Analysts had speculated that a rate adjustment may occur by midyear, which would facilitate a more gradual path to rate normalization in the future.
Fed officials “thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, although they generally did not rule out this possibility,” the minutes showed.
Mixed US Data
US jobless claims rose by 10,000 to a seasonally adjusted 274,000 in the week ended May 16, hovering near 15-year lows. Jobs data continue to offer hope the broader economy was on firm footing despite a sharp slowdown in the first quarter. Employers added 223,000 nonfarm payrolls in April, the Labor Department reported this month.
Separately, existing home sales declined unexpectedly in April, falling 3.3 percent to a seasonally adjusted 5.04 million. The reading dampened expectations for a bigger rebound in home sales after an impressive rally in March.
Finally, US manufacturing PMI eased to a 16-month low in May, as new orders rose at the slowest rate since January 2014. Markit’s preliminary manufacturing PMI slipped to 53.8 in May from 54.1 the previous month.
“Manufacturers reported their weakest growth since the start of 2014 in May, with the survey results adding to fears that the strong dollar is weighing on the US economy and hitting corporate earnings,” said Markit chief economist Chris Williamson in a press release. “Although falling only modestly, export sales have now dipped for two straight months, something not seen for two years and a far cry from the solid export performance seen this time last year. Overall order books are consequently growing at the slowest rate seen since the start of last year.”