GBP/USD – Cable Slips Below 1.30 on Dovish BoE, Soft Retail Sales

The pound remains under pressure and has slipped over 2 percent this week. A warning from the BoE and a decline in retail sales on Thursday have contributed to cable’s slide.
Kenny Fisher
GBP/CAD Last Line of Defense for Bulls

GBP/USD has recorded small gains in Friday trade. Currently, the pair is trading at 1.3024, up 0.12% on the day. It has been a dreadful week for the pound, which has fallen 2.2 percent, one of its worst weeks this year. The week wraps up with British Final GDP, which is expected to rebound in Q3 with a gain of 0.3%. The economy contracted by 0.2% in the second quarter.

Retail Sales Slide as Consumers Fret

British consumers were in a sour mood in November, as retail sales fell 0.6 percent. This reading was much worse than expected, as the estimate stood at +0.3 percent. No less worrying, retail sales have failed to post gains since July. Will consumers’ moods improve, now that there is more political certainty and Brexit is set to become a reality? If not, we can expect the pound to head lower. Another indication of subdued consumer activity is low inflation, which has come in at just 1.5% in the past two months. This is well short of the BoE’s inflation target of 2 percent.

There were no surprises from the Bank of England on Thursday, which maintained interest rates at 0.75%, where they have been pegged since August 2018. In a repeat of the November meeting, two of the nine MPC members voted to immediately trim rates to 0.50%. The bank’s rate statement was dovish, and left no doubt about its concern over risks to the economy, stating: “If global growth fails to stabilize or Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected U.K. recovery.” This dovish stance has weighed on the British pound.

 

Technical Analysis

GBP/USD continues to lose ground this week and break below support levels. The pair is testing the 1.3000 level, which has psychological significance. Below, there is support at 1.2940, which has held firm since the first week of December. On the upside, we find resistance at 1.3050, followed by the round number of 1.3100.

GBP/USD 1-Day Chart

 

Pacific Currencies – Summary

USD/CNY

USD/CNY plunged to a five-week low late last week, but has since clawed its way back to the symbolic 7.00 level. Currently, the pair is trading at 7.0097, unchanged on the day.

AUD/USD

Aussie Gains on Strong Job Numbers

AUD/USD continues to show strong swings this week, as the pair tries to find its footing. Currently, the pair is trading at 0.6887, up 0.02% on the day. The Aussie posted considerable gains on Thursday, as employment change roared in November, with a sparkling gain of 39.9 thousand jobs in November, its highest reading in four months. As well, the unemployment rate ticked lower to 5.2%, down from 5.3 percent a month earlier.

NZD/USD

After strong weekly gains for two successive weeks, NZD/USD has taken a pause. Currently, the pair is trading at 0.6592, down 0.12% on the day. In economic news, here was good news on the consumer front. Credit Card Spending posted a strong gain of 4.5%, up from 2.5% in the previous release.

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