Global macro overview for 19/04/2018

The British pound does not have an easy week so far, because the data from the labor market did not meet high expectations, and yesterday CPI inflation clearly disappointed the global investors. The basis for the demand for GBP is the assumption that while reducing the risk of "hard Brexit" and solid data, the Bank of England will decide to raise the interest rate in May. There is still the possibility, that the reports from this week do not cross out this scenario. Yesterday's disappointment is largely due to unfavorable weather conditions, which mixed up in the sale of spring collections, as well as changes in the government schedule of increases in the excise tax on cigarettes. Undoubtedly, these are one-off cases that BoE will not take into account. In addition, the rate of remuneration was above inflation (2.8% vs. 2.5%), which means that real wage is positive for the first time since January 2017, which the central bank will receive positively.

On the other hand, today's Retail Sales data clearly disappointed the global investors. The consensus was set to fall by 0.6 percent, so the market was already set to a weak reading, but the data published were even lower than this, at the level of -1.2%. The growth of sales before Easter did not help, as the statistical office cleans up data on their impact. Admittedly, there's little doubt that the seemingly endless episodes of snow and bad weather in March will have played a major role. That saw sales of goods from household goods to clothing fall during March, as many shopping centers/retail outlets remained closed completely during the spells of adverse weather.

In the wider perspective, for the pound, the prospects for monetary tightening are important, and the valuation of the May increase by the money market remains high at the level of 85%. The question is what is needed for the markets to change its mind regarding the BoE interest rate hike because the worse than expected data are not seriously taken into the account yet.

Let's now take a look at the GBP/USD technical picture at the H4 time frame. We can see clear five waves from the swing high at the level of 1.4379, with the low at 50% Fibo at 1.4170. Thre is an immediate bullish market response from this level and now the intraday technical resistance at 1.4233 is being tested. The next technical resistance is seen at the level of 1.4247 and 1.4279. The next downside target for the price is seen at 61% Fibo at 1.4120.

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The material has been provided by InstaForex Company - www.instaforex.com