Thursday 18 August 2016

GBP/USD exchange rate jumps on the back of lates retail sales reading


Yesterday saw the GBP/USD cross hold around $1.30 for the second consecutive day, with the currency pair bouncing between $1.2997 and $1.3051 throughout the course of the London trading session.

All eyes then turned to the latest Federal Reserve meeting minutes yesterday evening, as investors looked for any clues as to when the U.S. central bank would look to raise their benchmark rate for a second time.  

The minutes showed that policy-makers were divided over when the next rate hike should come with some Fed officials saying that current economic conditions would soon warrant another hike, while others still thought that more economic data and further improvement was needed.   

The result had very little impact on the FX market overnight and as the open of the London session approached the GBP/USD cross was trading around $1.3060.

The minutes confirmed the split messages we have heard from some Fed officials over the past couple days, so as it stands there is still a chance we could see the Janet Yellen and Co take action at their next meeting in September.  

Another boost for the UK economy.


Following a higher inflation reading on Tuesday, a drop in unemployment yesterday, this morning saw another positive data release for the UK with retail sales figures for July coming in much higher that forecast.

Many analysts had predicted July’s retail sales reading to improve to 0.1% (following Junes reading of -0.9%), but figures published this morning by the Office for National Statistics (ONS) showed that sales had increased to 1.4%.

The news gave the pound a huge lift and in the minutes after the data release the GBP/USD cross had risen to $1.3163, the highest we have seen the currency pair since the 7th August.

 

GBP/USD graph after this mornings retail figures.

 
 

More importantly it means the pound has now gained nearly three cents against the dollar since Monday when the GBP/USD cross was sitting down at $1.2874.  

The last three days have shown that it might not be all doom and gloom for the UK economy following Britain’s decision to leave the EU on the 23rd June.

It is still too early to say if the UK economy and the pound will recover back to pre-referendum levels anytime soon, especially as the government still need to trigger article 50 and negotiate our exit package.  

However, the early signs are better than expected and if eco-stats continue to improve we could quickly see the pound claw back some lost ground, which could push GBP/USD back above $1.35.

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