- GBP / USD is trading below 1.3800 as the pair gains for the second day, although it remains lower for the week.
- Softer USD conditions are the main driver of Friday’s gains, with UK and US data ignored.
The GBP/USD It is trading decent gains for the second day in a row, with the pair currently trading at session highs just below the 1.3800 level, a nearly 130 pip bounce from Thursday’s session lows around 1.3670. While GBP / USD gains on the day of nearly 70 pips (around 0.5%) on the day are impressive, the pair still has a long way to go to return to the levels it started the week at around 1.3850. . During the week, the pair continues to trade with losses of around half a percent or 70 pips.
Performance of the day
While the sterling outperformance on Thursday was behind the GBP / USD rally above the 1.3700 level, an outperformance to which market commentators attributed signals that vaccine tensions between the UK and the EU are declining, the pair’s recovery on Friday seems to have more to do with the US dollar side of the equations. Despite an increase in US government bond yields (10-year yields rose almost 5 basis points to retreat above 1.65%), which in recent weeks has supported the USD, the dollar is undergoing more consolidated trading on Friday, with the DXY retreating from weekly highs around 92.90 amid a broad improvement in market appetite for risk (global equities and risk-sensitive commodities and currencies are at their best. highest majority). As for why markets are in a better mood on the last day of the week, there does not appear to be any definitive fundamental catalyst and market participants are attributing price action to position adjustment before the weekend and at the end of the quarter. .
Data summary
In terms of economic events relevant to the exchange rate, there have been a few that stand out on both sides of the Atlantic. First, UK retail sales data for February was released before the start of the European session; Sales grew 2.1% month-on-month, roughly in line with market expectations and only slightly backing down from the sharp 8.2% month-on-month drop in January. As expected, UK retail sales continue to struggle in February with the closure of non-essential retailers in the country as a result of the third national closure. With stores reopening in mid-April, retail sales are expected to pick up. But that means at least one more month of retail sales data is stagnant; Note that data from CBI’s March distribution trade survey suggests that a substantial spike in spending is unlikely. However, this is what sterling traders expect and it shouldn’t hurt the currency.
Meanwhile, there are also major American data releases worth mentioning. First, personal income fell 7.1% in February, roughly in line with expectations as the momentum from the $ 600 stimulus controls dried up. Personal spending also saw a 1.0% month-on-month drop, falling slightly more than expected from 0.7% month-on-month. Capital Economics notes that bad weather also contributed to the declines.
Meanwhile, the Fed-favored inflation measure, the core PCE unexpectedly fell to 1.4% year-on-year in February from 1.5% in January, but most still expect April and May figures to show large year-on-year increases as a result of the effects of weak bases (reflecting the negative impact on prices from the first lockdown). As with the UK and British pound retail sales data, the US data did not have much of an impact on the USD or GBP / USD on the last trading day of the week.
Technical levels
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