Buying sentiment towards the British Pound was shaky on Thursday after British retail sales tumbled in March.
U.K retail sales slumped 1.2% in March, dragging the annualized figure to just 1.1% as unseasonably cold and snowy weather kept shoppers indoors. The combination of cooling inflation and disappointing retail sales could cast fresh doubts among investors over whether the Bank of England will raise interest rates next month. With Sterling highly sensitive to monetary policy speculation, market expectations over the Bank of England tightening monetary will remain one of the fundamental themes dictating the currency’s direction. There is a suspicion that the Bank of England is likely to move forward with raising rates next month despite signs of inflation cooling and retail sales falling. However, the rate outlook beyond May remains open to question.
Taking a look at the technical picture, Sterling remains under pressure on the daily charts with 1.4230 acting as a dynamic resistance level. Technical traders will continue to observe how prices react below 1.4230, with a failure of bulls to break above this level encouraging a decline back towards 1.4100. Alternatively, a breakout above 1.4230 could open a path higher towards 1.4400.
EURCHF eyes symbolic 1.20
It’s remarkable how the combination of monetary policy speculation and Russian sanctions have encouraged investors to ignore the Franc’s safe-haven appeal. The monetary policy divergence between the SNB and ECB remains a likely culprit behind the Franc’s depreciation. While the SNB continues to adopt an ultra-dovish on monetary policy, there is optimism that the ECB will end QE before the end of the year and raise interest rates in 2019. Currency weakness could also be on the back of U.S sanctions on Russian business negatively impacting Swiss firms. The EURCHF is currently within striking distance of the 1.20 symbolic levels and has scope to venture higher if the Franc continues to weaken.