IMPROVED RETAIL SALES IN UK BOOST THE FALLING POUND

The US dollar fell slightly against its major peers after the Fed released its minutes for the meeting held early this month. The statement showed that officials were hopeful of a rate hike during the next meeting which is scheduled for June 13. Some officials were also concerned about the future of forward guidance now that inflation is close to the 2.0% target.

Yesterday, the President announced his next battleground on trade. He directed the commerce ministry to investigate the impact of imports on the country’s national security. The new move is directly targeted to Mexico, South Korea, and Europe, which are the biggest automobile exporters in the country. During the campaign, the president talked passionately about the automobile industry and the impact NAFTA had created in the inner cities in the Mid-West. Stocks of companies like BMW, Volkswagen, and Mazda fell by 3.20%, 3.30%, and 5.5% respectively.

The pound recovered today after the data from the Office of National Statistics (ONS) showed an improving retail environment. Retail sales in April rose by 1.6%, which was higher than the expected 0.4%. The March retail sales had contracted by negative 1.1%. In April, the retail sales grew at an annualized rate of 1.5% which was higher than the expected 1.0%. The core retail sales grew at a MoM rate of 1.3% which was higher than the expected 0.4%.  They also grew at an annual rate of 1.5%, which was higher than the expected 0.1%. The retail sales data supported the pound after yesterday’s disappointing inflation data.

GBP/USD

Yesterday, the cable fell sharply from a high of 1.3490 to a low of 1.3304 after the statistics office released weak inflation numbers. Today, the pair has recovered a bit and is trading at 1.3410. The pair is trading slightly below the 100-day moving average. It is also trading at an important resistance level as shown below. If the pair crosses this support, there is a likelihood that it might continue moving higher. There is also a likelihood that the pair could reverse and continue the downward trend if it fails to cross the resistance level.

EUR/USD

The EUR/USD pair moved slightly higher after the Fed minutes were released. The pair is currently trading at 1.1730, which is higher than 1.1635, which is the YTD low. The pair could continue to move higher today, after the US jobless claims rose higher than expected. If it does this, traders should watch out for the 1.1768 level which forms an important resistance level for the pair. This is likely to happen as evidenced by the pair’s RSI, which is currently at 50 and the double moving averages as shown below.

USD/JPY

The USD/JPY pair reversed previous gains and fell from a high of 111.38 to the low of 109.3. The pair’s decline is attributed to North Korea which has threatened to call off the summit with the United States. It is now trading at 109.70. If tensions continue to rise, the pair is likely to continue moving higher, potentially to the 38.6% Fibonacci Retracement level of 110.10.