The dollar continued its weakness in last week’s trading session against a basket of other major currencies, after a string of disappointing U.S. economic reports fueled fresh concerns over the strength of the recovery.
Official data showed that U.S. retail sales including automobiles were flat last month, confounding expectations for a 0.2% rise. March’s figure was revised to a 1.1% increase from a previously estimated 0.9% gain.
Core retail sales, which exclude automobiles, increased by 0.1% in April, disappointing expectations for a 0.5% gain. The change in core retail sales for March was revised to a 0.7% increase from a previously estimated 0.4% uptick.
The University of Michigan said in a preliminary report that its consumer sentiment index fell to a seven-month low of 88.6 this month from 95.9 in April. Analysts had expected the index to decline to 96.0 in May.
The UoM also said its inflation expectations for the next 12 months ticked up to 2.9% this month from 2.6% in April.
Meanwhile, the GBP economy is showing fundamental improvement after data indicated that industrial and manufacturing production improved in the previous month to a reading of 0.5& and 0.4% respectively. Also average earnings index ticked up to 1.9% from 1.7%.
The pair surged to as high as 1.5814 last week before forming a temporary double top there and retraced. Initial bias is neutral this week and deeper pull back could be seen as the market seems to be over-bought. But we’d expect strong support from 1.5088/5496 to contain downside and bring another rally. Above 1.5814 will target 61.8% retracement of 1.7190 to 1.4565 at 1.6187. At this point, we’re slightly favoring that the rebound from 1.4565 as a correction. Thus, break of 1.5088 will indicate that such rebound is completed and turn focus back to 1.4565 low.
Later this week, investors will be taking a close fundamental look at the GBP CPI y/y, MPC Official Bank Rate Votes, BOE Gov Carney Speaks, Retail Sales m/m, USD FOMC Meeting Minutes, Unemployment Claims, CPI m/m and Core CPI m/m.