Pound Sterling: GBP Exchange Rates Higher After Retail Sales Data
- Written by: Gary Howes
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The pound sterling (GBP) managed to end the week gone by on a positive note thanks to surprsingly good retail sales data. However, familiar ranges continue to be navigated with no catalyst able to boost the UK unit substantially.
The GBP has perked up following the release of UK retail sales which came in ahead of expectations.
Retail Sales (YoY) (Mar) came in at 4.1%, well ahead of a predicted 3.8%, and up from the previous month's 3.7%.
The result is the GBP-EUR is now up marginally and the GBP-USD is no longer under pressure. However, the gains are not eye-opening and the theme of consolidation continues.
The latest live rates show:
- British Pound / Euro exchange rate:1.1696
- British Pound / US dollar: 1.2528
- British Pound / Australian dollar: 1.9209
- British Pound / Canadian dollar rate: 1.7202
- British Pound / New Zealand dollar rate: 2.1144
- British Pound / South African Rand rate: 23.2951
Please be aware that all quotes here are taken from the inter-bank market; this is the base level that your bank or payment provider will affix a spread before passing on a retail FX rate to you.
An independent FX provider will guarantee to undercut this offer, thereby quoting you on rates that can deliver up to 5% more FX in some cases. Please learn more here.
UK retail sales - what to expect
There has been little economic news for pound sterling traders to take note of. That changes today and we would expect to see moves away from the tight ranges if a surprise is sprung.
Retail Sales (YoY) (Mar) are predicted to have risen by 3.8%, up from the previous month's 3.7%.
Retail Sales ex-Fuel (YoY) (Mar) are predicted to have risen by 4.3%, up from the previous month's 4.2%.
Also keep an eye on BBA Mortgage Approvals - the hot property sector in the UK will be noted by the Bank of England when deciding where to take interest rates.
BEWARE profit taking
"While sterling refuses to fall, if consumer spending drops more than expected, it could trigger a quick and aggressive sell-off in GBP/USD. With long GBP/USD positions at an extreme level, it may not take much to trigger profit taking," says Kathy Lien at BK Asset Management ahead of the retail sales report.
However if retail sales surprises to the upside or comes out in line, "traders will look at the CBI number as a sign that demand recovered in April which would help sterling hold onto its gains and maybe even rise to new 4 year highs," says Lien.
It would seem therefore that the possibility of a sudden fall in the British pound is more of a possibility than a sharp rise.
The reason for this lies largely with the observation that the UK currency is now facing significant resistance levels against a host of currencies:
- GBP-EUR is stuck in the mid 1.21's and can't crack the 1.22 level.
- GBP-USD is finding the area below 1.71 to be a long-term area of resistance.
- GBP-NZD can't consider a serious break of 2.0.
- GBP-CAD has attempted to advance beyond 1.86 on many occasions in 2014 and has failed each time.
We reckon it will take more time and more strong economic outperformances before the rally in the pound sterling exchange rate complex can extend.
The question is whether the UK economy can deliver this outperformance as it has been doing reasonably well on this front and some analysts would tell you that the currency is priced to perfection.
If you are waiting for better rates it could be wise to lock-in the current levels with your currency broker; a forwards contract could offer you the best of both world's - better rates if the exchange rate rises and the peace of mind knowing that if these rates don't materialise you can still rely on the current locked-in levels.
