Sterling slides after weak UK retail sales and PMI data

The British pound declined today after the relatively weak economic data from the UK. According to the Office of National Statistics (ONS), the country’s retail sales numbers rose by 0.3% in December after falling by 4.1% in November. This led to an annualised increase of 2.9%. The two were lower than the expected increase of 1.3% and 2.9%. Meanwhile, the core retail sales numbers increased by an annualised rate of 6.4%. Further data from the country showed that public sector borrowing rose by more than £33 billion, from £25.3 billion a month before. The manufacturing, composite, and services PMIs also dropped to 40.6, 52.9, and 38.8, respectively.

The euro was little changed against most currencies after the relatively weak flash manufacturing and services PMI numbers from the European Union. In France, the manufacturing PMI increased from 51.1 to 51.5 while the services PMI fell from 49.1 to 46.5. In Germany, the manufacturing PMI declined from 58.3 to 57.9 while in the Eurozone, the services PMI fell to 45.0. The bloc’s manufacturing PMI declined from 55.2 to 54.7. These numbers are the earliest indicators of the impact of ongoing lockdowns.

Global stocks declined today after the PMI numbers. In Japan, the Nikkei 225 index declined by 0.45% while in Europe, the DAX and FTSE 100 indices dropped by more than 0.70%. In the United States, futures tied to the Dow Jones, S&P 500, and Nasdaq 100 indices dropped by more than 0.50%, In general, investors are worried about the impact that these lockdowns are having on the economy. Also, they are worried that the ongoing vaccination process is not going as fast as earlier expected. 

GBP/USD

After days of rallying, the GBP/USD declined today after the weak economic numbers. It is trading at 1.3663, which is below the double-top level of 1.3738. On the hourly chart, the short and medium-term moving averages have also made a bearish crossover pattern. The Relative Strength Index (RSI), which is an important oscillator, has moved back to the oversold level. Therefore, the pair will likely continue falling as bears target the Wednesday low at 1.3622.

EUR/USD

The EUR/USD continued rising today after the mixed PMI data from Europe. On the hourly chart, the pair has formed an ascending channel pattern that is shown in pink. It has also moved above the 25-period and 15-period exponential moving averages (EMA). However, the pair is also forming a bearish divergence pattern as shown by the Relative Vigour Index (RVI) and the Relative Strength Index (RSI). Therefore, the pair will likely experience a pullback during the American session.

AUD/USD

The AUD/USD turned around as worries of global growth resumed. It fell from the weekly high of 0.7782 to the current 0.7711. On the four-hour chart, this price is slightly above the upper side of the ascending trendline pattern. The Relative Strength Index (RSI) has also declined. Therefore, the pair will remain in an ascending trend so long as the price is above the lower side of this trend.