The pound fell against the greenback yesterday following the release of overwhelmingly positive US retail sales data for July. The UK’s GDP data was in line with economists’ expectations. Overall, the GBP/USD pair declined from a high of 1.2870 to a low of 1.2810 in the past 24 hours.
According to the UK’s Office for National Statistics, the country’s economy recorded no growth in June following a 0.40% GDP increase in the previous month, meeting the market’s expectations.
Services output declined by 0.10% m-o-m in June, following a 0.30% rise in May. Likewise, production output grew by 0.80% m-o-m in June, following an increase of 0.30% in the earlier month.
Also, the UK’s economy expanded 0.60% in the three months to June, compared with the three months to March. In May, the country’s economy rose by 0.70% in the three months to March. The reported figure was in line with economists’ expectations.
Services output inched up 0.80% in the three months to June 2024. Similarly, production output fell by 0.10% in the three months to June.
In a separate news release, the ONS stated that the UK’s construction inched up 0.50% m-o-m in June, following a 1.70% growth in the previous month. Economists had anticipated a 0.30% decrease.
The increase was led by fresh work, repair, and maintenance, which grew by 0.90% and 0.10%, respectively, in June.
Furthermore, the UK’s construction output contracted by 0.10% q-o-q in the June 2024 quarter. The decline was solely led by a 0.50% fall in fresh work. On the contrary, repair and maintenance rose by 0.40% q-o-q in the June 2024 quarter.
Seven out of the nine sectors recorded growth in June 2024. Non-housing repair and maintenance recorded a growth of 3.20%, while private commercial new work posted an increase of 2.10%.
The cumulative construction new orders surged 16.50% (or £1,771 million) in the June 2024 quarter, compared with the previous quarter.
The UK’s production output rose by 0.80% m-o-m in June following a 0.30% increase in the previous month, surpassing forecasts of 0.10% growth. The increase was led by a 1.10% m-o-m growth in manufacturing in June following a 0.40% increase in the previous month, exceeding forecasts of a 0.20% rise.
Electricity and gas production increased by 1.60% m-o-m in June. Likewise, water supply and sewerage grew by 0.20% in the same period. This was partly negated by a 4% m-o-m decrease in mining and quarrying in June.
Also, the country’s production output fell by 0.10% q-o-q in 2Q 2024. The decline was led by a 0.60% q-o-q fall in manufacturing in June. This was partly negated by a 2.20% increase in water supply and sewerage and a 2.50% rise in electricity and gas.
According to the US Census Bureau, the country’s retail sales grew by 1% m-o-m in July to $709.7 billion, following a 0.20% decline in the previous month, surpassing forecasts of 0.40% growth. The reported figure reflects the steepest rise since January 2023.
Sales at motor vehicle and part dealers grew by 3.60% m-o-m in July. Similarly, sales at electronics and appliance stores rose by 1.60%. Grocery stores posted an increase of 1% m-o-m in July while building materials and garden equipment inched up 0.90%.
Health and personal care and furniture sales rose by 0.80% and 0.50%, respectively. Nonstore retailers inched up 0.20% m-o-m in July. Likewise, gasoline stations grew by 0.10%. On the contrary, sales fell by 2.50% at miscellaneous stores. Also, sporting goods, hobbies, musical instruments, and books declined by 0.70% m-o-m in July. Clothing and footwear posted a decrease of 0.10%.
On a y-o-y basis, US retail sales surged by 2.60% in July 2024.
Nonstore retailers jumped 6.70% y-o-y in July 2024, while food services and drinking places grew by 3.40% in the same period.
Excluding auto and gas, US core retail sales inched up 0.40% m-o-m in July following a 0.50% increase in the previous month, surpassing forecasts of 0.20% growth. Furthermore, excluding food services, auto dealers, building materials stores, and gasoline stations, sales inched up 0.3% in July after rising by 0.9% in June, surpassing forecasts of 0.1%.
The US Department of Labor stated that the country’s unemployment claims fell to 227,000 in the week ending August 10 from 234,000 (upwardly revised by 1,000) in the previous week and bettered forecasts of 236,000.
The four-week moving average was 236,500, down from 241,000 (upwardly amended from 240,750) in the earlier week.
The upbeat US retail sales data is expected to keep the GBP/USD pair slightly bearish in the near term.
The historical price chart indicates that the GBP/USD pair is descending after facing resistance at 1.2870. The next major support is anticipated to be only near 1.2670. Additionally, the currency pair is trading below its 50-day moving average, while the stochastic indicator is descending towards the bearish zone. Therefore, we anticipate the GBP/USD pair to remain in a downtrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
