Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.3108-1.3463. The pair closed at 1.3342, surging 1.48% compared to Wednesdays close. It has been the 135th gain in the past 294 trading days. The daily high has been the highest level since June 30th, when a high of 1.3500 was registered. The major pair has neutralized earlier slump and is now up 0.85% so far during the current month, after depreciating 8.06% in June.
At 6:46 GMT today GBP/USD was gaining 0.49% on the day to trade at 1.3407. The pair touched a daily high at 1.3481 during the mid phase of the Asian trading session, or marking a new two-week high, and a daily low at 1.3352 during early Asian trade.
On Friday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United States
Consumer Inflation
The annualized consumer inflation in the United States probably accelerated to 1.1% in June, according to market expectations, from 1.0% in May. In monthly terms, the Consumer Price Index (CPI) probably rose for a fourth consecutive month in June, going up 0.3%, according to the market consensus, following a 0.2% surge in the preceding month.
In May, cost of food rose at an annual rate of 0.7%, following a 0.9% surge in April, cost of transportation services went up 3.2% year-on-year, decelerating from a 3.3% increase in April, while cost of energy dropped 10.1%, accelerating from an 8.9% drop in the preceding month, according to the report by the Bureau of Labor Statistics. On the other hand, cost of services less energy rose at an annualized rate of 3.2% in May, accelerating from a 3.0% surge in the prior month, cost of shelter went up 3.4%, following a 3.2% increase in April, while cost of medical care soared 3.5% year-on-year, following a 3.1% increase in April.
The annualized core consumer inflation, which is stripped of prices of food and energy, probably accelerated to 2.3% in June, according to market expectations, from 2.2% in May. If expectations were met, this would be the highest annual core inflation since February.
If the general CPI tends to approach the inflation objective, set by the Federal Reserve and considered as providing price stability, or a level below but close to 2%, this will usually bolster the appeal of the US dollar, as it heightens the probability of monetary policy tightening.
The Bureau of Labor Statistics is to release the official CPI report at 12:30 GMT.
Retail Sales
Retail sales in the United States probably rose for a third straight month in June, going up at a monthly rate of 0.1%, according to the median forecast by experts, following a 0.5% surge in May.
Among the 13 major categories, 9 registered growth and 4 registered a decline in May. During the period, a decrease in sales was registered at in building material & garden equipment and supplies dealers (-1.8%), miscellaneous store retailers (-1.2%), general merchandise stores (-0.3%) and furniture and home furniture stores (-0.1%).
On the other hand, in May, retail sales went up at gasoline stations (2.1%), sporting goods, hobby, book & music stores (1.3%), non-store retailers (1.3%), food services and drinking places (0.8%), clothing and clothing accessories stores (0.8%), health and personal care stores (0.6%), motor vehicle and part dealers (0.5%), food and beverage stores (0.5%) and electronics and appliance stores (0.3%), according to the report by the US Census Bureau.
Annualized retail sales increased 2.5% in May, following a 3.0% climb in April.
US core retail sales, or retail sales ex autos, probably rose 0.4% in June compared to a month ago, according to expectations, following another 0.4% gain in May. If so, it would be a fourth consecutive month of increase. This indicator removes large ticket prices and historical seasonality of automobile sales.
In case the general index of sales rose at a steeper rate than anticipated in June, this would have a strong bullish effect on the US dollar. The official report by the US Census Bureau is due out at 12:30 GMT.
Industrial Production
Industrial output in the United States probably expanded at a monthly rate of 0.2% in June, according to market expectations, following a 0.4% contraction in the prior month.
In May output in the US mining sector rose 0.2% month-over-month, following 8 successive months of contraction, as coal mining rebounded, while non-metallic mineral mining continued to expand.
The gauge for utilities registered a 1.0% monthly decrease in May, as lower output of electric utilities was partly neutralized by a surge in natural gas utilities.
Manufacturing production, which accounts for almost three quarters of total industrial production, shrank 0.4% in May, as production of durables contracted 0.7%, that of non-durables was little changed, while other manufacturing (publishing and logging) declined 0.6%.
In case the index of production expanded more than anticipated in June, this would have a moderate bullish effect on the US Dollar, because of positive implications regrading inflation pressure and overall economic activity, respectively. The Board of Governors of the Federal Reserve is to release the production data at 13:15 GMT.
Reuters/Michigan Consumer Sentiment Index – preliminary reading
The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States remained unchanged in July. The preliminary reading of the corresponding index, which usually comes out two weeks ahead of the final data, probably remained at 93.5 during the current month, matching the final reading in June. The latter came below the preliminary reading of 94.3, which was reported on June 10th.
The sub-index of current economic conditions dropped to a final reading of 110.8 in June from a preliminary value of 111.7. In May this barometer was reported at a final 109.9.
The sub-index of consumer expectations came in at a reading of 82.4, down from a preliminary value of 83.2 in June, and down from a final reading of 84.9 registered in May.
Participants in the June survey expected that the rate of inflation will be at 2.4% during the next year, or unchanged from the preliminary release and from the May survey.
In case the gauge of consumer sentiment came above expectations in July, this would have a moderate-to-strong bullish effect on the US Dollar. The preliminary reading is due out at 14:00 GMT.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.200% on July 14th, after which it closed at 0.148% to add 2.2 basis points (0.022 percentage point) compared to July 13th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.701% on July 14th, or the highest level since June 24th (0.755%), after which it fell to 0.669% at the close to add 0.004 percentage point compared to July 13th.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.521% on July 14th from 0.539% on July 13th. The July 14th yield spread has been the lowest one since July 12th, when the difference was 0.494%.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the daily levels of importance for GBP/USD are presented as follows:
R1 – 1.3375
R2 – 1.3407
R3 (Range Resistance – Sell) – 1.3440
R4 (Long Breakout) – 1.3537
R5 (Breakout Target 1) – 1.3651
R6 (Breakout Target 2) – 1.3703
S1 – 1.3309
S2 – 1.3277
S3 (Range Support – Buy) – 1.3244
S4 (Short Breakout) – 1.3147
S5 (Breakout Target 1) – 1.3033
S6 (Breakout Target 2) – 1.2981
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.3031
R1 – 1.3266
R2 – 1.3576
R3 – 1.3811
R4 – 1.4046
S1 – 1.2721
S2 – 1.2486
S3 – 1.2176
S4 – 1.1866
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.3817
R1 – 1.4517
R2 – 1.5722
R3 – 1.6422
R4 – 1.7121
S1 – 1.2612
S2 – 1.1912
S3 – 1.0707
S4 – 0.9501
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