The GBP/USD is hovering near the highest level this year after the relatively stellar UK retail sales numbers and flash manufacturing and services data. It is trading at 1.4185, which is 3.75% above the lowest level last week.
UK retail sales
The UK economy is firing on all cylinders. Last week, the UK GDP data revealed that the economy rose by 2.3% in May as the government started to reopen the economy. Earlier this week, the Office of National Statistics (ONS) reported that the UK unemployment rate declined to 4.8% in March. And on Wednesday, data showed that the overall UK inflation more than doubled in April.
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Today, data revealed that the overall UK retail sales jumped in April. In total, the headline sales rose by 9.2% in April after rising by 5.1% in the previous month. This increase was better than the median estimate of 4.5%. Because of last year’s lockdowns, the year-on-year sales increased by 42%, better than the expected 36.8%. This increase was mostly because of clothes and other accessories.
Meanwhile, the core retail sales increased from 4.6% in March to 9.0% in April. This was also better than the median estimate of 4.2%. The sales led to a year-on-year increase of 37.7%. In a note, an analyst at Lloyds Bank said:
“Optimism remains cautious, particularly given the presence of new emerging variants which could see shoppers return to the online habits that have become so dominant over the past 12 months”
The GBP/USD is also rising after the strong UK flash manufacturing and services PMI. According to Markit, the manufacturing PMI rose to 66 in May from 60.0 in the previous month. Similarly, the services PMI rose to 66 from 61.1 in April. This is a sign that the UK economy is firing on all cylinders. As such, this could push the Bank of England (BOE) to pull the trigger and start tightening its pandemic response measures.
GBP/USD technical analysis
The daily chart shows that the GBP/USD pair has been on a strong upward trend recently. The shares have jumped by almost 25% from the lowest level last year. They are also forming what seems like a cup and handle pattern whose top part is at the year-to-date high of 1.4240. In technical analysis, a cup and handle pattern is usually a bullish signal. It also remains above the 100-day and 50-day moving average. Therefore, it is just a matter of time before the sterling jumps above the YTD high of 1.4240.