Sterling soars to multi-month high on strong retail sales
The British pound held steady after relatively strong economic data from the United Kingdom. According to the Office of National Statistics (ONS), the country’s headline retail sales jumped in April. In total, sales rose by 9.2% from March to April while core sales rose from 4.6% in March to 9.0%. On a year-on-year basis, the sales jumped by 42.4% and 37.7%, respectively. The strength of these sales was mostly because April was the first full month since the UK government started to reopen the country. Analysts expect that retail spending will start to normalize in the coming months.
The UK recovery extended in May, according to data compiled by Markit. The numbers showed that the manufacturing PMI rose from 60 in April to 66.1 in May. The services PMI also increased from 60.1 in April to 61.8 in May. As a result, the composite PMI rose from 60.0 to 62.0. These numbers were strong because of the ongoing reopening and strong local and international demand. Like the retail sales, analysts expect that the recovery will start to slow as the Bank of England starts to tighten and as the government pulls some of its support. For example, the government will end its furlough program in September this year.
The euro also held steady after relatively modest data from the Eurozone. Data by Markit revealed that the bloc’s manufacturing index fell from 62.9 in April to 62.8 in May. In the same period, the services PMI increased from 50.5 to 55.1 while the composite PMI rose from 53.8 to 56.9. These numbers came a few days after the European Commission upgraded the EU economic outlook. Therefore, there are signs that the ECB will start tightening ahead of the Federal Reserve.
The EUR/GBP pair declined to a low of 0.8600 after the strong data from Europe. On the four-hour chart, the lowest point today was along the lower line of the ascending channel that is shown in pink. The pair is also below the 25-day exponential moving average and is at the 50% Fibonacci retracement level. The Relative Strength Index (RSI) has also dropped to 40. The pair has also formed a bearish flag pattern. Therefore, the pair may keep falling as bears target the lower side of the channel at 0.8560.
The EUR/USD pair held steady today after the strong Eurozone manufacturing and services PMI data. The pair rose to 1.2240, which is slightly below the year-to-date high of 1.2245. On the four-hour chart, the pair is above the 25-day moving average. The pair is also slightly below the upper side of the ascending channel. The Relative Strength Index (RSI) is rising and is slightly below the overbought level of 70. Therefore, the pair may soon jump as investors price in a more hawkish European Central Bank (ECB).
The GBP/USD rose to 1.4233, its highest level since February 24. On the four-hour chart, the price moved above the important resistance of 1.4222. On the four-hour chart, the pair moved above the short and long-term moving averages. The Chaikin Oscillator also moved above the neutral level of zero. The pair has also moved slightly below the upper line of the ascending channel. The bullish trend may continue rising as bulls target the upper side of the channel at 1.4250.