Sterling forms head and shoulders after strong UK GDP data
The British pound rose after the mixed economic numbers from the UK. Earlier today, data by the British Retail Consortium (BRC) revealed that the overall retail sales dropped by 2.4% in February as the country started to reopen. Further data by the Office of National Statistics (ONS) revealed that the economy performed better in the fourth quarter than feared. In total, the economy rose by 1.3% QoQ and shrunk by 7.3% year-on-year. This performance was better than the expected 1% and -7.8% gain, respectively. Business investments declined by 7.4% in the quarter as companies continued to worry about Brexit. Data by Nationwide revealed that the house price index declined by 0.2% in March leading to an annualised gain of 5.7%.
The euro gained against the US dollar after the relatively strong EU inflation numbers. According to Eurostat, the overall consumer price index (CPI) rallied by 1.3% year-on-year in March this year. This was an improvement from the previous month’s increase of 0.9%. This growth was primarily due to the energy component that rose by 4.3% in March. Services increased by 1.3% while food, alcohol and tobacco rose by 1.3%. In Germany, the biggest economy in Europe, the unemployment change declined by 8,000 in February while the unemployment rate remained at 6%.
The FTSE 100 index declined by more than 0.25% as hedge funds moved to close their quarterly gains. The top mover at the London Stock Exchange (LSE) was Deliveroo, the delivery startup whose shares dropped by more than 30% after it went public. The shares fell to 271p as investors protested its voting structure, where the CEO has 70% voting rights. By fall, the firm lost more than 2 billion of its market value. Other top movers in London were BT Group, AVEVA, Smiths, and Unilever.
After days in the red, the EUR/USD rose to an intraday high of 1.1745 from the year-to-date low of 1.1700. On the four-hour chart, the price is below the 25-day and 15-day moving averages while the Relative Strength Index (RSI) has moved above the overbought level of 30. The pair is also below the important resistance level at 1.1840, the lowest level since March 9. Still, the pair may resume falling as traders target the next key support at 1.1650.
The FTSE 100 declined slightly as investors focused on the Deliveroo shares. The index is trading at £6,745, which is below the monthly high of £6,805. On the four-hour chart, the pair seems to be forming an ascending triangle pattern. It is also along the middle line of the Bollinger Bands. Therefore, the index will likely breakout higher in April as bulls target the important resistance at £6,850.
The GBP/USD pair rose to an intraday high of 1.3785. On the four-hour chart, the pair has moved above the 25-day moving average. Also, a closer look shows that it has formed a head and shoulders pattern whose neckline is at 1.3700. The price is also slightly above the Alligator indicator. Therefore, because of the head and shoulders pattern, the pair may decline as bears attempt to move below 1.3700.