Poor U.K. Retail Sales Report Drives GBP/USD Lower

The GBP/USD declined for a third day after a report showing retail sales fell more in September than traders forecast. The led to increased concerns the economy was faltering.

According to the Office for National Statistics, U.K. retail sales decreased 0.3 percent from August. Traders and analysts were looking for a 0.1% reduction. Trader believe the poor Euro Zone economy is partially to blame for the weakness.

The EUR/USD also traded lower early in the session before short-covering triggered a rebound rally. The catalyst behind today’s early weakness was a report showing French manufacturing contracted more this month than economists forecast.

The data from Markit Economics showed an index of French manufacturing slid to 47.3 in October, from 48.8 the previous month. Traders were looking for a reading of 48.5. The services index fell to 48.1. Any move below 50 suggests contraction rather than expansion is taking place.

After the early weakness, shorts began to cover, triggering a turnaround by the EUR/USD after Euro Zone composite PMI data was reported stronger than expected at 52.2 in October, up from 52.0 in September. The composite data is a combination of services and manufacturing.

Just a short while ago, the U.S. reported an increase in weekly jobless claims. Initial claims increased 17,000 to a seasonally adjusted 283,000 for the week ended October 18 according to the Labor Department. There was very little movement in the foreign currency markets after the report was released.

December Comex Gold traded lower despite the weaker dollar. The main trend is still down despite the recent rally. Fresh selling pressure hit the market earlier in the week after the market reached a key 50% level. This sell-off will continue if the U.S. Dollar strengthens, Euro Zone inflation remains low and the stock market remains strong.

December Crude Oil futures traded flat to a little better after yesterday’s sharp sell-off. Overproduction and low demand continue to plague the market. The short-term bottoming action is just profit-taking and position-squaring. If you believe the fundamentals, this market is headed lower.

On Wednesday, the market sold off after the Energy Information Administration said in its weekly report that U.S. inventories increased by 7.1 million barrels. Traders had priced in an increase of 2.8 million barrels.