UK retail sales data fails to pack the punch

Sterling bulls were hesitant to make an appearance during Thursday’s trading session, despite UK retail sales exceeding market estimates by rising 0.3% in July.

July sales were largely driven by the biggest increase in food buying in almost two years, which offset a decline in the purchase of other goods. However, in annual terms, sales disappointed by growing just 1.3%, which was below the 1.6% expectations. What took the punch out of the report and repelled bulls further, was the fact that June’s retail sales were also revised down from 0.6% to 0.3%. Although the volume of goods sold in July printed above expectations, the total growth was relatively soft and highlighted how the gap between inflation and wages continues to squeeze household finances.

It has certainly been another interesting trading week for Sterling, with bear’s bent on winning the tug of war around 1.2850. The British Pound/U.S. dollar (GBP/USD) currency pair is under pressure on the daily charts with traders eyeing 1.2850. A breakdown and daily close below this level should encourage a further decline towards 1.2775.

Euro pressured following ECB minutes
The mighty euro lost ground against a stronger dollar on Thursday, after the European Central Bank minutes from July’s meeting revealed concerns over the strength of the euro.

A stronger euro poses a headache for European policy makers and dilutes the ECB’s efforts to hit the golden 2% inflation target by making exports less attractive and imports cheaper. The absence of a hawkish presence in the minutes, also compounded the downside, with the euro/U.S. dollar (EUR/USD) currency pair trading around 1.1670 at the time of writing.

Although encouraging macro-fundamentals from the European economy have supported the euro, speculation around the central bank tapering QE remains one of the key culprits behind the euro’s resurgence. With the euro becoming sensitive to monetary policy speculation, the currency is at risk of depreciating further against the dollar if expectations of the central bank tapering QE, start to fade amid the inflation concerns.

Commodity Spotlight – gold
gold bulls received a shot in the arm on Wednesday after July’s dovish Federal Reserve minutes weighed on the prospects of higher U.S. interest rates this year.

The yellow metal was granted further support from the ongoing uncertainty revolving around President Donald Trump which bolstered its allure. With fading rate hike expectations punishing the dollar and political drama in Washington stimulating risk aversion, gold is likely to remain supported moving forward. From a technical standpoint, the yellow metal is bullish on the daily time frame as there have been consistently higher highs and higher lows. The breakout above $1,283 should encourage a further appreciation towards $1,300.