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UK retail sales drop 0.5% – GBP/USD dips below 1.70

No surprise in UK retail sales: they dropped by 0.5% as expected. However, the markets were front running the publication with a move higher of GBP/USD. We are now seeing a “sell the fact” reaction.  The volume of retail sales in the UK was expected to drop by 0.5% in May after a surprising jump of 1.3% in April.

GBP/USD already made a move upwards before the  release, enjoying the weakness of the US dollar following the FOMC meeting last night. It peaked at 1.7024 just before the data hit the newswires. Update: GBP/USD rises back above 1.70.

Earlier in the week, UK inflation fell short of expectations with only 1.5%. The MPC meeting minutes were unanimous and left markets wondering, as there were both hawkish and dovish comments.

It seems that the Bank of England wants markets to think that a rate hike in 2014 is still on the cards. As always, it depends on the data.

Later on today we have the CBI Industrial Order Expectations in the UK, followed by the US weekly jobless claims and the Philly Fed Manufacturing Index.

1.70 is a clear separator of ranges. It is immediate support. 1.6940 follows. On the topside, the historic post crisis high of 1.7042 is key resistance. Beyond this line, it is back to levels last seen in 2008.

For more, see the GBPUSD forecast.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.