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Sterling regains ground as Retail sales jump

GBP - British Pound

The Great British pound looked to test eight-month highs that investors saw on Wednesday evening, gaining 0.8% on the day to 1.3220. Yesterday however saw sterling tail off against its US counter part as a combination of profit taking and positive FOMC minutes from the Federal Reserve Bank saw heavy dollar buying.

This morning, Sterling has regained most of its ground following the overnight release of US Jobless claims and better than expected UK retail sales numbers, released this morning.

Initial jobless claims jumped to above 1 million (against expectations of a drop compared to last month). Although continuing claims edged slightly lower to 14.8 million, while UK Retail sales returned to pre-pandemic levels, posting a 3.6% increase from July. The Office for National Statistics confirmed sales are now 3% higher than February before the World Health Organization declared a pandemic and the UK was placed in Lockdown.

The combination of weak US and better than expected UK data has meant GBP/USD climbed back above the 1.32 level plus GBP/EUR gained above 1.1150.

Attention now turns to Manufacturing and Services PMI numbers from the UK, Europe and US.

Key Movers

The USD was sold off in droves yesterday following a jump in the number of US jobless claims. In addition, the Philly Fed business outlook experienced a bigger-than-expected setback, mirroring the weak reading in the Empire manufacturing survey earlier in the week. These surveys point to downside risk for today's PMI manufacturing.

Commodity linked currencies were broadly lower over the past 24 hours with the New Zealand dollar seeing the biggest losses on weaker oil prices overnight. The Australian dollar struggled to regain its momentum yesterday after falling a full cent from eight-month highs following the release of US Federal Reserve minutes.

Oil prices dropped on concerns for the world’s largest offshore oil rig company – Valaris Plc who filled for voluntary bankruptcy in the Southern District of Texas as they looked to restructure $7 billion in debt.

As mentioned above, all eyes will now be on Manufacturing and Services PMI numbers from the UK, Europe and the US.

Expected Ranges

GBP/USD: 1.3125 - 1.3250 ▲

GBP/EUR: 1.11 - 1.12 ▲

GBP/AUD: 1.8275 - 1.8425 ▲

GBP/NZD: 2.0075 - 2.0235 ▲

GBP/CAD: 1.7350 - 1.7475 ▲