Our forecast for GBP/USD near term moves
In our daily currency review we will take a look at the rather volatile days for GBP/USD pair. As the UK retail sales numbers hit the newswires fell in March, hit by cold weather, after rebounding in February.
Retail sales volumes fell 0.7%
Following a poor performance during a snow-impacted January and the underlying picture for the sector remains one of weak sales growth, according to new National Statistics data. Total retail sales volumes fell 0.7% on the month to stand 0.5% lower than in March 2012. When adjusted excluding auto fuel, retail sales dropped 0.8% on the month in March.
Albeit volumes are dropping, the retail sector is expanding, comparing it to the last quarter however the rate at which this is happening is quite benign and the pace is marginal. Retail sales volumes in the first quarter were up 0.4% after having having fallen 0.6% in Q4 2012. While food sales continue to grow, sales at non-food stores are non perfoming with every non-food store sector reporting a contraction in sales volume on the month.
If we take a closer look at the charts we are observing rather cruel price swing on a daily basis with the market not taking any clear direction, preferring instead to trade in a range between various points in the 1.52 and 1.53 figures. After the report was released the GBP/USD dropped to around 1.5217 which was the lowest point for the day. Market players quickly dismissed the weak report as it fell in line with the broad consensus which investors have already priced in. Our recommendation in the near term trade for the British pound is to sell its strength if it approaches 1.54 in the medium term.
As of writing an opportunity arose from comments made by the Bank of England member Weale – the rate spiked above 1.53 as he said in a Bloomberg interview that the Bank of England’s policy guidance has problems and he has an open mind to policy instruments. He also said that as inflation pressure subsides further stimulus is justified and there is a minor risk that UK’s Q1 GDP is going to contract in the first quarter. Any further stimulus measures by the central bank should play a negative role in the price of Sterling.
Currently the rate is trading around 1.5280 and we are strong believers that if we achieve a close on an hourly basis above 1.53 we are very likely to see another round up towards the 1.5340-50 area. On the other hand if the rate succeeds to drop back down towards 1.5250 we are more likely to see 1.52 before we see 1.53.
Calendar is light on news tomorrow from the UK, however further action is warranted once another batch of Euro zone rumors and risks hit the wires. The Euro zone is the largest trading partner of the UK and any developments in the continent have some weight in the GBP/USD pair too.