Sterling bounces back after strong UK retail sales

US stocks are wavering today as investors react to the latest action by Steve Mnuchin, the Treasury Secretary. In a statement yesterday, he directed the Federal Reserve to end the emergency lending programs it initiated early this year on December 31. The affected programs are Fed’s buying corporate bonds and the Main Street Lending Program that targeted small and medium-sized businesses. The market is also focusing on the rising number of Covid cases, with the US reporting more than 180,000 new cases yesterday. 

The British pound is little changed today after the UK reported strong retail sales numbers. According to the Office of National Statistics (ONS), the country’s retail sales rose by 1.2% in October, leading to a year-on-year increase of 5.8%. The two figures were better than the expected increase of 0.1% and 4.2%, respectively. In the same month, the country’s core retail sales rose by 1.3% and at an annualised rate of 7.8%. This growth was mostly because of early Christmas shopping. The government’s borrowing decreased from September’s £27.85 billion to £21.58 billion. 

The Japanese yen was in a tight range after the country released October inflation data. According to the country’s statistics office, the headline consumer prices dropped by 0.1% in October, a sign that the country is still in deflation. The core CPI also dropped by 0.7% in October. Further data by Nomura showed that the country’s flash manufacturing PMI dropped from 48.7 in October to 48.3 this month. Analysts were expecting the PMI to move close to the expansion level of 50. 

GBP/USD

The GBP/USD pair rose to an intraday high of 1.3283 after strong retail sales data. On the four-hour chart, the price is significantly above the ascending white trendline. It has also moved above the 14-day moving average and is a few pips below the important support of 1.3313. The RSI, which was falling earlier today, has also started rising. Therefore, the pair will likely continue rising, with the next target being at 1.3313.

EUR/USD

The EUR/USD is little changed today as traders continue focusing on the European Union’s budget crisis. On the daily chart, the price is in the same level it has been this week, which has led its volatility to fall, as evidenced by the Average True Range (ATR) indicator. It is also a few pips below the important resistance level at 1.1930 and above the support at 1.1609. Therefore, the pair is likely to end the week at the current range.

USD/JPY

The USD/JPY price is little changed today after the Japan inflation and PMI data. On the hourly chart, the price is slightly below the descending white trendline and is along the 14-day and 25-day moving averages. The pair has also formed a descending triangle and a bearish flag pattern. Therefore, while the pair is likely to end the week at the current level, there is a possibility that it will break out lower next week.