Pound Falls as UK Data Continue to Disappoint

The pound extended the decline started on Tuesday and is currently trading at the lowest level since October last year. Yesterday, the UK’s Office of National Statistics (ONS) released the CPI numbers, which were lower than expected. The CPI for June rose by 2.4%, which was lower than the expected 2.6%. Today, retail sales also missed analysts’ forecasts. In June, retail sales in the country rose by 2.9%, which was lower than the expected 3.7% and May’s 4.1%. May’s numbers were partly attributed to the royal wedding. Meanwhile, the Financial Conduct Authority (FCA) warned the EU and UK banks to prepare for a hard Brexit if a transition period is not in place by March.

The Japanese Yen fell today after the country’s statistics office released trade numbers. These numbers were the earliest indication of the impacts of the trade war. In June, the country’s exports rose by 6.7%, which was lower than the expected 7.0%. Imports in the country rose by 2.5%, which was lower than the expected 5.3%. Exports to the United States fell for the first time in 17 months while imports from the US fell too. This widened the Japanese trade surplus to the US, which the Trump administration is trying to contain.

The dollar extended previous gains after Fed’s Jerome Powell continued hawkish statements yesterday. In a testimony to Congress, the Fed chair reiterated his previous call that the gradual rate hikes process was the best for the country. The dollar strength was also attributed to the weakness of the other currencies that make up the dollar index. The USD was further supported by the improving manufacturing and initial jobless claims numbers. The Philadelphia Fed Manufacturing index for the month of July rose to 25.7, which was higher than the expected 21.6. The jobless claims for the past week dropped to 207K, which was lower than the expected 220K.

The Australian dollar fell against the major peers even after the country released better-than-expected jobs numbers. In June, the country added 50.9K jobs, which was better than the expected 16.7K. The unemployment rate remained steady at 5.4%, while the participation rate improved to 65.7%, which was higher than the expected 65.5%. The decline was probably due to the NAB quarterly business confidence which fell to 7 and the stronger dollar.

AUD/USD

After rising yesterday, the AUD/USD pair wiped the gains and is currently trading below yesterday’s lowest level. The pair is now trading at 0.7340, which is an important support as shown below. The price is also below the 50 and 25-day Exponential Moving Averages (EMA). If the pair moves slightly below this level, it could be an indication that the pair could move lower. There is also the likelihood that the pair could try to turn upwards as bulls take control.

EUR/USD

The EUR/USD pair continued the downward momentum started a few days ago. It is now trading at 1.1595 and is attempting to reach 1.1590, the lowest level since July 2. The price is below the important 50 and 25-day EMAs. The MACD is showing signs that the pair could continue the downward momentum. However, once the pair reaches the important support of 1.1590, it will likely find some resistance. If it moves lower, the pair could extend the downward movements, though traders should be cautious.

GBP/USD

The GBP/USD pair fell to the lowest level since October last year. It is now trading at the 1.2930 level, which is at the extended lower end of the Bollinger Bands. The price is below the 25 and 50-day Moving Averages, with the RSI at the oversold level of 30. While the cable will remain a bit volatile as the Brexit debate continues, there is a likelihood that the pair will reverse the gains as bears take profits.