Global macro overview for 20/09/2017

Global macro overview for 20/09/2017:

The Retail Sales data from the UK has beaten market expectations. Change in the total value of inflation-adjusted sales at the retail level with auto fuel was released up to 1.0%, while market participants expected only a 0.2% increase after 0.6% number last month. Moreover, on a yearly basis, the sales jumped to 2.4% from 1.4% a month ago, beating the consensus of 1.1%.

The latest Bank of England Agents Report revealed that UK households had responded to squeezed incomes by trading down or focusing on essential purchases. As a result, demand growth slowed down across a number of consumer-facing sectors, and modest nominal consumer spending growth primarily reflected headline inflation. Investment intentions indicated weaker growth within services, but were more positive for goods exporters. Growth in labour costs per employee was subdued, with settlements clustered around 2.0% to 3.0%. Recruitment difficulties remained elevated, with conditions becoming very tight for some skills. The impact of a decline in the sterling value on consumer inflation appeared to have reached its peak. Consumer services inflation was steady overall.

In conclusion, better than expected sales data and quite positive Agents Report might both add to the recent market sentiment regarding the possibility of the Bank of England interest rate hike. Yesterday's comments from BoE Governor Mark Carney, who had reiterated after his colleagues that an interest rate hike might come in the "coming months", the British Pound is still being well bid across the board.

Let's now take a look at the GBP/USD technical picture on the H4 time frame. The pair is trading around the level of 1.3556 under overbought conditions and a visible bearish divergence has formed between the price and the momentum indicator. The immediate support is seen at the level of 1.3462, but the most important level for bulls is the technical support at the level of 1.3270 as any breakout lower will be the first sign that bears are in control over this market again. The larger time-frame trend is still upward.

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