British Pound Rises to 10-Week High on Higher Retail Sales

Fundamental analysis of Forex market

GBP/USD has posted strong gains in the Thursday session. Currently, the pair is trading at 1.3260, up 0.85% on the day. On the release front, British retail sales posted a gain of 0.3%, beating the estimate of -0.2%. Over in the U.S indicators looked sharp, as Philly Fed Manufacturing Index and unemployment claims both beat expectations. On Friday, the UK releases public sector net borrowing.

A positive retail sales report on Thursday has boosted the British pound. Earlier in the day, GBP/USD climbed to 1.3299. its highest level since July 10. The currency moved higher after retail sales posted its fourth gain in five months. However, the gain of 0.3% in August was substantially lower than the July release of 0.7%. The respectable retail sales report follows a strong CPI release on Wednesday – the reading of 2.7% beat the estimate of 2.4%. This marked the strongest inflation reading since February.

After a brief respite, the US-China trade spat ratcheted upwards this week. Following weeks of speculation, U.S President Trump announced 10% tariffs on some $200 billion worth of Chinese goods. Only this time, investors didn’t panic and the Japanese yen and other currencies have held their own against the greenback. Investors appeared to have been ready for a move by Trump, and may be sighing in relief that the tariff was set at 10% rather than at 25%. One senior economist summed up Trump’s most recent salvo as “bad but manageable”. However, if the Chinese do indeed retaliate and the U.S takes further measures, this would likely shake up the currency markets and boost the U.S dollar.