- Empire State Manufacturing Index plummets
- Markets await UK employment, US retail sales on Tuesday
- British pound rebounds after sharp slide
GBP/USD has started the week in positive territory, after a two-day slide that saw the pound lose 1.5%. In the North American session, GBP/USD is trading at 1.2514, up 0.54%.
On the economic calendar, it’s a fairly quiet start to the week. There are no releases out of the UK. In the US, the Empire State Manufacturing Index slid to -31.8, versus 10.8 prior and an estimate of -2.5 points. This was the lowest level in three years and pointed to a sharp contraction. Orders and inventories fell sharply, and the report was another indication of the sorry state of the manufacturing sector.
The US releases retail sales on Tuesday, with the markets expecting an improvement in the April data. The headline reading is expected to improve to 0.7%, up from -0.6%, and the core rate is projected to rise to 0.4%, up from -0.4%. If the data is within expectations, it would indicate that consumers are still spending, despite a drop in consumer confidence.
UK claimant counts expected to drop
Friday’s GDP release pointed to a UK economy in trouble. March GDP came in at -0.3%, and Q1 growth posted a meagre gain of 0.1%. The economy might manage to avoid a recession, but the BoE is projecting practically zero growth in 2023. The labour market has remained robust in the UK, despite the weak economy and the bite of rising interest rates. However, cracks are appearing – unemployment claims rose by 28,200 in April, and are expected to rise by 31,200 in the April report, which will be released on Tuesday.
The Bank of England will be keeping a close eye on wage growth, a driver of inflation. The estimate for average earnings including bonuses for January-March stands at 5.8%, versus 5.9% in the previous release.
- GBP/USD is putting pressure on resistance at 1.2524. The next resistance line is 1.2604
- 1.2369 and 1.2289 are the next support levels