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Sterling Climbs on Strong Inflation, Retail Sales Up Next

David Becker
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Sterling Climbs on Strong Inflation, Retail Sales Up Next

The GBPUSD moved higher on Tuesday, but ran out of steam as it approached resistance near the 10-day moving average. Stronger than expected inflation data released on Tuesday push gilt yields higher making the pound more attractive versus the greenback. Next up on the economic calendar is the retail sales report, which should give investors a look into consumer sentiment.

U.K. April CPI came in stronger than expected at 1.8% year over year, up from 1.6% year over year in March and above the median forecast for a 1.7%. Core CPI rose from 1.6% year over year to 2.0%. The ONS stats offices points out that the timing of Easter this year is likely to have had an impact, particularly on air and sea fares, which were key components in driving transport costs up and providing the biggest contribution to the rise in prices on the month.

This offset a decline in food prices, which was the largest negative factor. Meanwhile, PPI data showed a 5.5% year over year decline in input prices and flat month over month and 0.6% year over year readings in output prices, which were two tenths of a percentage point lower than the median expectation on both counts. The retail price index came in at 0.4% month over month, which was in line with economists’ expectations.

Next up for investors is the retail sales report, which is scheduled to be released on Wednesday May 21, 2014. UK retail sales are expected to increase 0.4% month over month according to the mean expectations of economists. This should equate to a 5.2% increase year over year compared to a 4.2% increase in March.

While resistance is seen near the 10-day moving average, support is seen near the recent lows at 1.6730. Momentum is negative with the MACD printing in the red with a downward sloping trajectory.

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