The Pound Sterling (GBP) rebounds towards the round-level resistance of 1.2700 against the US Dollar (USD) in Tuesday’s American session. The GBP/USD pair found buyers' interest after the United States (US) monthly Retail Sales report for May showed that sales at retail stores grew by 0.1%, slower than expectations of 0.2%. The report also showed that consumers cut their spending heavily on discretionary items, suggesting that household crises have deepened due to higher interest rates by the Federal Reserve (Fed), and receipts at service stations were of lower amounts due to soft gasoline prices.
Weak US Retail Sales data has weighed on the US Dollar (USD), which rebounded in European trading hours after a modest correction from a six-week high. The US Dollar Index (DXY), which tracks the greenback’s value against six major currencies, surrenders intraday gains and falls to 105.30.
Broadly, the USD Index remained firm as Federal Reserve (Fed) officials continued to argue in favor of cutting interest rates only once this year. Fed policymakers want to see inflation decline for months to gain confidence in lowering interest rates. They remain concerned over a reacceleration in price pressures due to premature rate cuts even though the progress in the disinflation process has resumed after stalling in the first quarter of the year.
On Monday, Philadelphia Fed Bank President Patrick Harker emphasized keeping rates unchanged for now to maintain downward pressure on inflation in various sectors such as housing and services, notably auto insurance and repairs. On the interest rate outlook, Harker sees one cut in benchmark rates this year if his economic forecast plays out, Reuters reported.
The Pound Sterling recovers to near the crucial resistance of 1.2700 against the US Dollar. The GBP/USD pair rebounds but still remains below the 20-day Exponential Moving Average (EMA) near 1.2720, suggesting that the near-term trend is uncertain. While the 50-day EMA near 1.2670 is acting as a major support for the Pound Sterling bulls.
Currently, the Cable holds the 61.8% Fibonacci retracement support (plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300) at 1.2667.
The 14-period Relative Strength Index (RSI) falls back into the 40.00-60.00 range, indicating that the upside momentum has faded.
The Retail Sales data, released by the US Census Bureau on a monthly basis, measures the value in total receipts of retail and food stores in the United States. Monthly percent changes reflect the rate of changes in such sales. A stratified random sampling method is used to select approximately 4,800 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms across the country. The data is adjusted for seasonal variations as well as holiday and trading-day differences, but not for price changes. Retail Sales data is widely followed as an indicator of consumer spending, which is a major driver of the US economy. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Last release: Tue Jun 18, 2024 12:30
Frequency: Monthly
Actual: 0.1%
Consensus: 0.2%
Previous: 0%
Source: US Census Bureau
Retail Sales data published by the US Census Bureau is a leading indicator that gives important information about consumer spending, which has a significant impact on the GDP. Although strong sales figures are likely to boost the USD, external factors, such as weather conditions, could distort the data and paint a misleading picture. In addition to the headline data, changes in the Retail Sales Control Group could trigger a market reaction as it is used to prepare the estimates of Personal Consumption Expenditures for most goods.
Keep up with the financial markets, know what's happening and what is affecting the markets with our latest market updates. Analyze market movers, trends and build your trading strategies accordingly.