The pound was under pressure following the release of disappointing unemployment data while the euro continued its run higher for the second time in as many days. As the New York trading session approaches, traders will be looking for increasing retail sales numbers and a slew of central banker speeches.
The UK Claimant Count showed a surprising rise of 700 new jobless claims. The report’s negative tone was furthered as the previous monthly report was revised lower to show a reduction of 8.5K new jobless claims from a previous 10.5K. Economists had forecasted a decrease of 3.6K. The report identifies a slowdown in the UK economic recovery and underscores yesterday’s lower than expected CPI report. These two data pieces combined may give the BOE reason to hold off raising interest rates in the May meeting. In a separate report the UK unemployment rate fell unexpectedly to 7.8% from 8.0%.
In response to the negative claimant count the pound lost ground versus both the dollar and the euro with the GBP/USD trading as low as 1.6236 from 1.6254 and is currently trading at 1.6267. While the fundamentals are beginning to turn against the pound, the GBP/USD was been relatively stable. This may speak more to the dollar’s weakness than the pound’s strength, but nevertheless the GBP/USD has failed to make a move below the 38% retracement level from the move stemming from the late March low to this week’s high. Further support is at 1.6175 and 1.5970. Dollar weakness could support the cable and I expect another retest of the 1.6420 level.
Despite disappointing industrial sales numbers the euro was bid higher today and underscores the momentum behind the recent 3-week move. Industrial production for the month of February rose only 0.4% on expectations of 0.8%. In response the EUR/GBP climbed higher to 0.8917 from 0.8903 and the EUR/USD touched yesterday’s high at 1.4519 but failed to move above this level. However, this is only a minor resistance and traders should be targeting the 1.4580 resistance level.
This afternoon traders will be looking for increasing retail sales numbers from the US which are due to be released at 12:30 GMT. Forecasts are for a rise of 0.6%. Crude oil inventories are scheduled for 14:30 GMT. Central bankers from Canada and Australia will also speak later in the afternoon.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
