Yesterday’s trade saw GBP/USD within the range of 1.5591-1.5470. The pair closed at 1.5537, rising 0.17% for the day following a two-day drop of 1.4%.
At 07:03 GMT today GBP/USD was up 0.03% for the day to trade at 1.5541. The cross held in a daily range between 1.5526 and 1.5561 and is down 1.1% for the week so far.
Fundamentals
United Kingdom
Annualized retail sales in the United Kingdom probably rose at a rate of 3.8% in April, according to the median forecast by experts, after in March sales were up 4.2%. If so, this would be the 25th consecutive month of sales growth. In monthly terms, retail sales probably increased 0.4% last month, following an unexpected 0.5% contraction in March.
Annualized retail sales, without taking into account fuel sales, likely rose at the annualized pace of 3.7% in April, following a 5.0% gain in March. Month-on-month, core retail sales are projected at +0.3%.
This is a short-term indicator which provides key information about consumption on a national scale. Higher retail sales suggest stronger consumer demand, confidence, and respectively, economic growth. Therefore, in case the index of retail sales increased at a faster-than-projected pace, this would be pound positive. The Office for National Statistics will publish the official data at 08:30 GMT.
A separate report by the Confederation of British Industry (CBI) might show that the gauge of industrial orders in the United Kingdom probably improved to a reading of 3 in May, according to expectations, from 1 in April.
This is a leading indicator of business conditions and reflects the net balance between companies that registered an increase in industrial orders during the respective period and those that registered a drop. The CBIs Industrial Trends Survey provides expert qualitative opinion from senior manufacturing executives on past and expected trends in output, exports, prices, costs, investment intentions, business confidence and capacity utilization. A level above zero suggests that volume of orders is projected to increase, while a level below zero indicates that expectations point to lower volumes. If the survey showed predominant optimism, this would have a certain bullish effect on the sterling. The data are due out at 10:00 GMT.
United States
The number of people in the United States who filed for unemployment assistance for the first time during the week ended May 16th probably increased to 271 000 from 264 000 in the previous seven days. The 4-week moving average, an indicator used to iron out week-to-week volatility, was at 271 750 last week, below the previous weeks average.
Initial jobless claims number is a short-term indicator reflecting lay-offs in the country. In case the count of claims dropped more than projected, this would have a bullish effect on the greenback.
The number of continuing jobless claims probably rose to 2 231 000 during the week ended May 9th from 2 229 000 the previous period. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago. The Department of Labor is to release the weekly report at 12:30 GMT.
Manufacturing
Later in the day, a preliminary report by Markit Economics will likely show that manufacturing activity growth in the United States accelerated in May, with the corresponding preliminary Purchasing Managers Index expected to come in at a reading of 54.5 from 54.1 in April.
Chris Williamson, Chief Economist at Markit commented in Aprils final report: “With manufacturing output growth slowing to the weakest seen so far this year and exports falling for the first time since November, the survey results raise worries that the dollar’s appreciation is hurting the economy. The weakening growth trend and fall in price pressures add to a growing clutch of disappointing numbers which suggest the Fed will err on the side of caution and hold off from rate hikes until a clearer picture emerges of the economy’s health.”
Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI accelerated more than anticipated, this would have a certain bullish effect on the US dollar, and vice versa. The preliminary data by Markit Economics is due out at 13:45 GMT.
A separate report by the Federal Reserve Bank of Philadelphia is anticipated to show that manufacturing activity in the region inched up in May, with the corresponding index rising to 8.0 in May from 7.5 a month earlier.
The index is based on a monthly business survey, the Business Outlook Survey. Participants share their opinion about the direction of business changes in overall economy and different indicators of activity in their companies, such as employment, working hours, new and existing orders, deliveries, inventories, delivery time, price etc. The results are presented as the difference between the percentages of positive and negative projections. A level above zero is indicative of improving conditions, while a level below zero is indicative of worsening conditions. The data are due out at 14:00 GMT.
Resales of homes
At the same time, the National Association of Realtors (NAR) will release its report on existing home sales for April. The gauge probably gained 1.0% on a monthly basis to the annualized level of 5.24 million, up from 5.19 million a month earlier.
Statistical data on existing home sales is often used along with statistical figures regarding the new home sales and pending home sales, with the major objective being to draw a conclusion how the nation’s housing sector is performing, regardless of interest rates. The most active house-purchasing period in the United States is usually between the months of March through June. Therefore, in case statistical data revealed a sudden drop in the number of homes sold rather than an improvement during this period, this would be considered as a signal of weakness in country’s housing market.
The report on existing home sales usually doesnt cause a real direct impact on the US economy. Actually, this effect appears to be minimal due to the fact that nothing is produced with the mere sale of an existing home. In terms of economic activity, the sale of an existing house may be related only to interior design and purchases of new furniture.
The reason markets pay a certain attention to the existing home sales report is that it reveals much about the general course of nation’s economy. A major part of the population considers a house as a sign of wealth and, unlike the money wealth which is concentrated in certain regions of the country and held by the wealthiest representatives of the population, ”housing wealth” is evenly distributed across the country.
Pivot points
According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.5533. In case it penetrates the first resistance level at 1.5595, it will encounter next resistance at 1.5654. If breached, upside movement may attempt to advance to 1.5716.
If the cross drops below its S1 level at 1.5474, it will next see support at 1.5412. If the second key support zone is breached, downward movement may extend to 1.5353.
In weekly terms, the central pivot point is at 1.5643. The three key resistance levels are as follows: R1 – 1.5896, R2 – 1.6068, R3 – 1.6321. The three key support levels are: S1 – 1.5471, S2 – 1.5218, S3 – 1.5046.
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