HomeContributorsFundamental AnalysisStrong Retail Sales Sends Pound Above 1.25

Strong Retail Sales Sends Pound Above 1.25

GBP/USD continues to push upwards, and has climbed above the 1.25 level on Thursday. In the North American session, the pair is trading at 1.2510. On the release front, British Retail Sales posted a strong gain of 1.4%, crushing the estimate of 0.4%. As well, CBI Realized Sales held steady at 9 points, above the forecast of 4 points. In the US, unemployment claims jumped to 258 thousand, well above the forecast of 240 thousand. There was better news from New Home Sales, which improved to 592 thousand, compared to a forecast of 566 thousand.

This week’s focus has been on British consumer indicators. Retail Sales sparkled in February with a gain of 1.4%, its highest gain since October 2016. At the same time, for the three months to February, retail sales suffered their biggest slide since 2010. This points to an erosion in consumer spending due to the weak pound, which has fallen 17% since the Brexit vote. The weak currency and higher oil prices have also sent inflation higher. CPI climbed 2.3% in February, beating the forecast of 2.1%. This is a significant reading, as it surpassed the BoE’s inflation target of 2.0% for the first time in three years. Higher inflation levels has increased speculation that the Bank of England, which has had a neutral stance on rate policy, could raise rates this year. On Thursday, BoE deputy governor Ben Broadbent said that a rate hike was a possibility.

With the Fed pressing the rate trigger last week, what’s next for the central bank? The Fed’s rate statement and dot plot indicated that the Fed is looking at another two hikes in 2017, which would make three in total. This forecast was reiterated by Chicago Fed President Charles Evans earlier this week. Although one could make a strong case that three rate hikes in 2017 would be impressive, the markets appear disappointed, and would like four hikes, given the strong performance of the US economy. The Fed’s cautious approach has soured sentiment towards the greenback, resulting in the dollar heading lower against its major rivals. The pound has taken full advantage, rising 3.0% since the Fed rate announcement last week.

MarketPulse is a forex, commodities, and global indices research, analysis, and news site providing timely and accurate information on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Featured Analysis

Learn Forex Trading