With the GBP/USD currency pair currently trading around the 1.3550 area, indicative of a very careful but positive mood, this movement has been able to find its way to strong support far surpassing 1.3500. This firmness comes on the heels of the July US retail sales report, which came in line with hopes and expectations. The Greenback is under enough pressure to produce a friendlier setting for the Imperial Cotton Moth, aka the British Pound. Traders are nonetheless uneasy as they dissect the newest economic signals.
July US retail sales jumped 0.5%, illustrating that consumers are still spending with confidence. Specifically, auto sales increased 1.6%—significant to be sure—but sales excluding autos were up only 0.3%. Consumer spending has some encouraging signs. Defitors are still cautious. Underlying this hesitance is a deep fear of a slowing job market and rising inflation. This backdrop is playing into the ambivalent sentiment gripping GBP/USD, which remains in very choppy waters amid these economic headwinds.
Economic Indicators Impacting GBP/USD
The latest US retail sales numbers provide one index of the strange economic times we’re living through. Retail sales on the whole are up just 0.5%. This robust growth is a testament to consumer resilience and it may help build investor confidence as we move into the third quarter. Analysts, though, are still cautious, pointing out that the increase is relatively small compared to the robust gains from the past several months.
Additionally, after the fact upward revisions to activity in June point to consumers being on a bit firmer footing. That very dour outlook persists due to concerns over the deteriorating jobs market. That would severely curtail new spending as inflationary pressures remain elevated.
As one economic analyst commented, “Despite the promise of today’s upward revision, spending in the second half is still pretty hesitant.” This hesitance is fueled by a cooling jobs market and fears of inflationary pressures. Therefore, although GBP/USD has already launched a sizeable recovery, cautions with regards to yesterday’s move have market players taking a wait-and-see approach.
The Influence of the Greenback
The Greenback’s current disposition goes a long way in driving GBP/USD’s performance. The US Dollar continues to be offered, providing a supportive setting for the GBP to appreciate versus its US equivalent. Such a magnificent backdrop permits GBP/USD to crawl up comfortably above 1.3500 handle.
Supply and Demand Market dynamics suggest that GBP/USD advances are mostly due to this continued GBP/USD offering paradigm. As investors adjust to these ongoing swings, it’s clear that outside events are the most important drivers when it comes to currency values.
“Real-time quotes” – source not specified.
Bulls are in control on the daily chart. Just note that it’s not really tied by design to stock or Gold price time series data. The complex foreign exchange market dynamics make it so that these various factors affect currency pairs in different ways, often making predictions harder.
Market Sentiment Going Forward
With GBP/USD still just above 1.3550, traders have one eye nervously on a bearish development. On net for the week, we’re looking at strong positive numbers. Doubt persists due to contradictory economic signals being sent on either side of the Atlantic.
Gold prices are indicative of the overall depressed market mood. They stay range-bound sub $3,350 per troy ounce with selling pressure on the US Dollar and slight upward movements in US yields across the curve. This same tendency in behavior between precious metals and value of the U.S. dollar shows a greater uncertainty in the world’s financial markets.