The British pound had a pretty busy week in terms of economic data. On Monday, the RICS house price balance was released and the figures once again were disappointing. The number came at -24%, indicating that market participants continue to see the house prices in the U.K. declining. This was the indicator’s lowest reading since November 2011. Analysts were expecting a drop to -23% from a reading of -22% for the previous relevant period. Despite the bad data the pound rose against the dollar as sentiment across investors continued to move to the upside. The GBPUSD touched highs of 1.5717 before finishing the session at 1.5675. On Tuesday, more data hit the wires with both the CPI and the RPI numbers coming in much better than expected. The CPI for July rose to 2.6% from the low of 2.4% it had reached in June. Analysts were expecting the decline in inflation to extend in July, projecting a CPI of 2.3%. At the same time the retail price index for July rose to 3.2% from 2.8% for the month of June. Economists projected the retail price index to remain unchanged. The pound initially gained on the news, but after touching highs of 1.5727 it lost momentum and declined in the second part of the session to close at 1.5673, slightly off of the lows for the day. On Wednesday, the GBP/USD tested the support at its 25-period moving average on couple of occasions, but failed to break sustainably below it. After these failed attempts, the sterling regained some of its strength and rose to the key 1.57 level, propelled higher by the employment data for the British economy. A report by the Office of National Statistics showed that the number of people claiming unemployment-related benefits dropped by 5,900, while analysts were expecting an increase of 6,200 people. The unemployment rate in the country also improved, declining by 0.1% to 8.0%. The pound responded well to these data, but in the afternoon it lost its upward momentum when the market participants had some time to process the MPC Meeting Minutes. The latter indicated that the decision to leave the U.K.’s benchmark rate unchanged was reached unilaterally, which was interpreted by investors as a sign that further monetary easing is unlikely, at least in the near term. The GBP/USD declined, pushing below both its 25-period and its 50-period moving averages. The currency pair even touched lows of 1.5632 in the early hours of today’s session ahead of the closely monitored retail sales report. When finally the retail sales figures were released around 08:30 GMT, the British currency shot up and has been trending higher ever since. The pound broke above the aforementioned moving averages once again and was even able to conquer the 1.57 level it has struggled with all week long. According to the Office of National Statistics the retail sales rose by 0.3% in July, much more than the 0.0% economist were projecting. The reading for June was also drastically revised on the upside – from 0.1% to 0.8%. As we mentioned already the sterling welcomed the news and advanced. The British currency touched highs of 1.5744, testing the resistance at the tops we reached in late July.
Technically speaking, support in the GBP/USD is provided by the psychologically significant 1.57 level, while resistance stands at the tops we have just mentioned. Oscillators are trending higher with the relative strength index currently standing at 65 and the stochastic already in overbought territory, standing at 85. The MACD is moving in a tight range, slightly above the key 0 level.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.