HomeContributorsFundamental AnalysisPound Hits 1.40 Despite Soft UK Retail Sales

Pound Hits 1.40 Despite Soft UK Retail Sales

The British pound has posted small gains in the Friday session. Currently, GDP/USD is trading at 1.4000, up 0.18% on the day.

Sterling rallies past 1.40 line

The pound enjoyed an excellent Thursday, as GBP/USD climbed close to 1 percent. The pair has continued to move higher on Friday and breached the 1.40 level, a symbolic level that had held since April 2018. The dollar index has dropped on Friday 0.38%, to 90.24. There is support at 90.00, and a daily close below this level would signal a downtrend for the US currency.

UK Retail Sales slide

UK Retail Sales suffered a miserable start to the year, with a read of -8.2% for January. This was the second decline in three months and the weakest reading since April. This sharp decline resulted from the tighter health restrictions, which severely crimped consumer spending.

However, other indicators have been positive, and the pound has emerged unscathed on Friday despite the dreadful retail sales numbers. The services sector has stabilised, jumping from 38.8 to 49.7 in January. This is just below the neutral-50 level, which separates contraction from expansion. The read easily beat the forecast of 42.1. The Manufacturing PMI also improved in January, from 52.9 to 54.9. This was above the forecast of 53.1.

The week wraps up with US Services and Manufacturing PMIs for January. Both sectors are well within expansionary territory, which bodes well for the US economy as it emerges from the downturn caused by the Covid-19 pandemic. The forecast stands at 57.9 for Services PMI and 58.4 for Manufacturing PMI. These releases are unlikely to affect the movement of GBP/USD, unless the forecasts are very wide of the mark.

GBP/USD Technical

  • GBP/USD is testing resistance at 1.3985. Above, there is resistance at 1.4104
  • There is support at 1.3734. Below, we find support at 1.3615.
  • The 50-day moving average is situated at 1.3639
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