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Retail sales dropped by 0.8%, significantly more than 0.5% that was expected. GBP/USD fell, continuing the trend that began yesterday and approaching support.

After a strong leap of 1.5% last month (also revised downwards from 1.9%), a correction was expected now. But the magnitude of this important indicator, also reflecting consumer confidence, was stronger.

For those rate doves that saw the rising inflation as merely imported inflation due to commodity prices, and not inflation driven by domestic demand, this was a great proof. Such figures cause the Bank of England to hesitate on raising the rates, weakening the pound.

GBP USD Falling on Retail Sales
GBP USD Falling on Retail Sales - Click to enlarge

GBP/USD now trades at 1.6160, falling from 1.6230 beforehand.. It’s noteworthy to mention that once again, the fall from previous trading range began before the release. It seems that lots of British data is leaked to the market.

Support is found at 1.6110, followed by the round number of 1.60. Resistance is back at the same area – 1.6280 – 1.63.  For more events and technical analysis for GBP/USD, see the  British Pound forecast.

Strong pound movements

Two days ago, GBP/USD made a leap on unexpected accelerated inflation, and broke to levels unseen for a long time. This created hope for a rate hike in the nearer future. According to the charts, this was leaked to the markets.

But then came the meeting minutes, which showed that no new members joined the hawk side – no new votes were seen for a rate hike within the MPC. This sent cable down to the previous range, and now lower.