Article by ForexTime
The GBP/USD snapped back on Thursday following a stronger than expected retail sales report. Wednesday price action was definitely dollar bullish on the heels of the Federal Reserve announcement on interest rates. Although the Fed did change the considerable time phrase and is moving in the direction of rate normalization, the tone continued to be dovish allowing U.S. stocks to rally.
The FOMC wound down 2014 by obscuring its already convoluted statement and leaving its options open for the timing of policy normalization in 2015. Having retired QE3 in the previous meeting, the Fed this time added “patience,” as flagged in advance, while also keeping a reference to “considerable time,” with Yellen emphasizing that the phrases are consistent with a first tightening that is “at least” two meetings away which would be data-dependent. A brighter economic outlook was tempered by an estimated undershoot of its inflation mandate that will merit “monitoring closely.” Overall, the Fed sufficiently muddled its message to leave the deck clear for any chosen policy path in the New Year, which may have been their ultimate objective.
U.K. November retail sales much stronger than expected, rising 1.6% month over month from an upwardly revised +1.0% month over month in October and 6.4% year over year, the highest annual rate seen since May 2004 and up from October’s 4.6%. The median forecasts had been for a 0.3% month over month and 4.4% year over year increase.
Upside risk to the official data had already been flagged by last week’s BRC retail sector survey. Robust activity at the U.K.’s version of Black Friday gave sales a big boost, while there is also the backdrop of record high total employment levels and rising average household incomes, which are up in inflation-adjusted terms for the first time in years. Consumer spending is helping offset slowing export performance due to the economic stagnation that’s being seen across the Channel.
The GBP/USD exchange rate is holding near the bottom end of its recent trading range. The RSI is neutral near 46, which the MACD is printing near the zero index level reflecting consolidation.
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