Video Source: Reuters on YouTube
The pound lost ground against the greenback yesterday following the release of than anticipated decline in retail sales volume in August. The US durable goods orders data for July was also poor. However, excluding aircraft orders, the durable goods orders data represented a slight growth. Additionally, the US unemployment claims were lower than anticipated. This enabled the greenback to strengthen against the pound. Overall, the GBP/USD pair declined from a high of 1.2790 to a low of 1.2671 in the past 24 hours.
According to the UK Confederation of British Industry, for the fourth month in a row, the country’s retail sales volumes declined 44% in the year to August, following a 25% decline in the previous month. Economists had anticipated a slightly lower decline of 14%. Worrisomely, sales are forecast to decline further in September, although a relative slower rate of 21%.
Furthermore, retailers forecast a slight decline of about -14% in their business scenario in the upcoming three months. This compares with a positive reading of 6% in May.
Also, retailers anticipate a 25% decline in investment in the forthcoming 12 months, compared with the previous 12 months. However, the decline is expected to be lower than -43% recorded in May.
In the period leading up to August, there was a consecutive decline in retail employment for the fourth quarterly assessment. However, this reduction occurred at a more gradual pace compared to the earlier quarter, with a decline of 20% versus a 48% drop observed in May. It is anticipated that the rate of decrease in headcount will exhibit a slightly milder trend in the upcoming month, with a projected decline of 16%.
The rise in selling prices within the retail sector exhibited a slight decline in the year to August. Nevertheless, it stays considerably high when assessed against historical standards, having risen by 73% as compared with the 77% jump recorded in May. Retailers forecast an increase of 74% in the next month.
Internet sales volumes fell by 15% in the year to August following a 46% decrease in July. The association expects online volumes to decline by 14% in September.
According to the data published by the US Department of Labor, the country’s first-time jobless claims declined to 230,000 in the week ended August 19 from 240,000 in the previous week and lower than forecasts of 239,000. However, the four-week moving average rose to 236,750 from 234,500 in the previous week.
Additionally, continuing claims declined by 9,000 to 1,702,000 in the week ended August 12 and bettered economists’ forecasts of 1,708,000. The reported figure is close to a month low, implying tight labor market conditions.
According to the US Census Bureau, the country’s durable goods orders declined 5.20% m-o-m in July following a 4.40% growth in June and worse than forecasts of a 4% contraction.
The reported figure was the steepest decline in durable goods orders since the outbreak of COVID-19 in April 2020, led by a considerable decline in demand for transport machinery.
The decline was mainly led by a 14.30% fall in orders for transport machinery after four successive months of growth. Specifically, the demand for civilian aircraft plunged 43.60% in July following a 71.10% rise in June. Defense aircraft orders contracted 10.90% m-o-m in July following a 2% growth.
Computers and electronic products orders inched down 0.10% in July compared with an increase of 1.20 in June. Machinery orders rebounded with a growth of 1.10% in July following a decline of 0.60%. Electrical equipment, appliances, and components posted a growth of 1% in July following a 0.40% rise in June. While fabricated metal products grew by 0.70%, primary metals inched up 0.10%. Excluding aircraft, orders for non-defense capital goods, grew by 0.10% in July.
The weak economic data from both countries is expected to keep the GBP/USD pair range bound in the short term.
Technically, the GBP/USD pair is declining after facing resistance at 1.2790. The next support is anticipated only near 1.2485. Additionally, the currency pair is trading below its 50-day moving average while the MACD indicator is showing a negative reading. Therefore, we anticipate the GBP/USD pair to remain in a downtrend in the short term.
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