GBP/EUR 1.1608 (0.8615)
Data was light during yesterday’s European session with June UK retail sales figures topping the bill. The shift in BOE expectations and a backdrop of marginally improving data have been supportive of the pound but we have yet to see a move towards outward GBP strength. Yesterday’s retail sales came in as expected posting .2% month on month growth which bodes well for the UK economy as May’s bumper 2.15% growth was a tough act to follow and provides evidence that the consumer led recovery is gaining some form of traction.
This morning on the economic calendar we have fiscal data from the UK including public finances and public borrowing, but GBP crosses are unlikely to be impacted too greatly. EURGBP managed to trade down to our target of .8600 yesterday where it came into some support, further support below around .8575 is key to break if we are to see a rotation back into the lower .8400-.8575 range. Resistance to moves higher should come in ahead of .8650 with a break above opening moves towards recent highs above .8700.
The Eurozone calendar has been light this week but no data has been good for the EUR which has remained relatively firm this week despite the lack of data and negative headline news from the peripheral. The euro’s decline against GBP was driven by a shift in BOE expectations and we are still around the opening levels of the week. EURUSD is higher on the week but a failure to break above 1.3200 and stronger than expected data from the US may see this pair revert towards 1.3000
The Philly Fed manufacturing index rose to 19.8 in July from 12.5 in June, well above the consensus forecast of 8.0. The underlying data could be interpreted as mixed with the employment index climbing, but a surprise decline in the new orders index may indicate a slower recovery than expected. Further positivity can be taken from the weekly jobless claims, figures fell to near five year lows at 334k vs expected 345k.
GBPUSD is at a cross roads, verging on USD strength from increased tapering expectations and the pound itself is showing signs of strength with improving economic data, Q2 GDP figures due next week. For both currencies we await further information, continued improvement in the US are warranted for tapering and forward guidance from the BOE will have an impact on the pound. 1.5300 is resistance, a break above there before the weekend and we may have a run towards 1.5400 next week. Support below is ahead of 1.5000.