GBP/USD Regains Key level after disappointing US data
The latest US retail sales data was weaker than expected with a headline decline of 0.2% for July compared with consensus forecasts of a 0.1% gain for the month.
The CPI inflation data was also below consensus forecasts with headline prices unchanged for the month and the year-on-year rate declining to 1.6% from 1.7% while the core year-on-year rate was held at 1.7% as prices rose 0.1% on the month.
What does this mean?
The weaker than expected data undermined confidence in the US growth outlook and also curbed expectations that the Federal Reserve would increase interest rates again in the short term. Given the importance of interest rates, the dollar weakened after the data with the trade-weighted index at the lowest level for over nine months.
The US currency also lost ground against all the major currencies, especially against the CAD after Bank of Canada raised the interest rates.
GBP/USD initially moved to the important 1.3000 area after the US data. This is an important level, especially as GBP/USD failed to hold above this level in both May and late June, when the Sterling decreased after UK election shock.
Markets monitor these key levels very closely and a more convincing move higher triggered a round of more aggressive Sterling buying as sellers rushed to close existing short positions.
Overall, GBP/USD moved to a 10-month high above 1.3080.
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