Weak Sales Reverses Upward Momentum in the GBP/USD

The GBP/USD reversed its upward climb and turned negative following a weaker than expected CBI sales report. Momentum has turned negative as the pound was gaining traction against the greenback, and poised to continue its upward trend. Interest rates in the UK have been underperforming US rates making the pound more attractive.

The UK February CBI distributive sales much weaker than expected, with the headline realized sales figure dropping to +1, down from +42 in the month before and well off the median forecast for +34. Sales in department stores and supermarkets dropped notably. This could have been a snap back following very robust sales in November, prompted by the first U.S.-style black Friday event in the UK, and unexpectedly strong activity in December. The outlook for the sector remains pretty good, with average household incomes accelerating on the back of trending improvement in the labor market.

Looking forward, Q2 GDP is scheduled for release on Tuesday. No surprises are expected in the second estimate of Q4 GDP, which should be reaffirmed at 0.5% q/q and 2.7% year over year. Q1 survey data have so far been pointing to a firming up in activity after the soft patch in the latter part of 2014. This should be reflected in the Gfk consumer confidence figure, which we expect to edge out a new cycle high of +2 in February after +1 in January.

Short term momentum on the pound has turned negative. The MACD (moving average convergence divergence) index has turned negative. This occurs when the spread (the 5-day moving average minus the 26-day moving average) crosses below the 13-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal. Support on the currency pair is seen near the 10-day moving average at 1.5350.

The post Weak Sales Reverses Upward Momentum in the GBP/USD appeared first on Forex Circles.

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