STERLING FALLS THANKS TO WEAK RETAIL SALES DATA
The price of crude oil declined sharply after data from EIA showed a surprise increase in inventories. The numbers showed that inventories rose to 6.5 million barrels, which was higher than the 1.8 million that traders were expecting. This was the fourth straight week of increased stocks. The numbers came a day after data from the American Petroleum Institute (API) showed that inventories had fallen sharply by 2.1 million barrels, which was significantly lower than the 9.75 million that traders were expecting.
The GBP fell against the USD after weak retail sales numbers. The data from ONS showed that retail sales declined by minus 0.8%, which was lower than the minus 0.4% that traders were expecting. On an annual basis, retail sales rose by 3.0%, which was lower than August’s gain of 3.4%. The core retail sales which exclude the volatile food and energy products rose by an annualized rate of 3.2%, which was lower than the estimated 3.7%. This came a day after the country released weaker CPI numbers.
In addition to the data, Theresa May was criticized by her Tory party for the concessions she has made on Brexit. Most importantly, they criticized her for accepting that the UK will likely remain tied to EU rules beyond December 2020 as the two parties solve the Irish border issue. There was confusion as May told EU leaders that she was ready to extend the transition period.
The Australian dollar declined after the country released mixed employment numbers. In September, the economy added 5.6K jobs, which was lower than the 15.2K that traders were expecting. Further, the participation rate was at 65.4%, which was lower than the anticipated 65.7% gain. On a positive side, the unemployment rate declined from 5.3% to 5.0%. This was the lowest the unemployment rate has been since 2012.
The USD was little moved even after the impressive manufacturing PMI and employment numbers. The Philadelphia Fed Manufacturing Index rose to 22.2, which was higher than the expected 19.7. The initial jobless claims fell to 210K against the expected 212K while the continuing jobless claims fell to 1,640K, which was better than the expected 1,665K. The jobless claims are currently at the lowest level in more than 45 years. This week, the Labor Department said that there were more than 7 million job vacancies in the country.
The EUR/USD pair started declining on Tuesday this week after reaching a high of 1.1620. Today, it reached an intraday low of 1.1480 and started moving up. The upward momentum today was short lived and the pair is headed lower after hitting an intraday high of 1.1526. There is a likelihood that today’s upward movement was a false breakout as evidenced by the volumes indicator. Traders should, therefore, focus on today’s low of 1.1480.
The GBP/USD pair is trading at 1.3100, which is also along the 50% Fibonacci Retracement level. This is lower than the day’s high of 1.3132 and is along the middle band of the Bollinger Bands. The pair will likely see some major movements after EU leaders complete the summit at Brussels. Weakness of the sterling will see it test the important support of 1.3075 while gains will see it test the 1.3150 resistance level.
The price of Brent declined to an intraday low of $78.40 after the latest inventory data. This was a continuation of the sharp decline that started on October 5 when the price reached a high of $86.70. The downward trend will likely continue in the next few days. This is mostly because of the strength of the trend as evidenced by the ADX index which is currently a 40 and the RSI index which is approaching the oversold level of 30. While 30 is usually the oversold level, it could also be an indicator of the strength of the downward trend.