US Retail Sales weak and UK CPI stronger, but the focus is on FOMC

November Retail Sales were 0.3% MoM for November vs an expectation of 0.9% MoM, much lower than October’s 1.8% MoM print. Retail Sales ex-autos were also 0.3% MoM vs an expectation of 0.7% MoM and a 1.8% MoM reading in October. Could it be that the highest inflation level in 40 years as finally caught up to the American consumer? Recall that the November headline inflation print was 6.8%! Although this print may give the pause to the FOMC when considering increasing the pace of tapering bond purchases, the number is still positive. The FOMC should have no reason to believe that November’s slowdown is the start of a trend. Therefore, there is no reason to expect that the FOMC will change its plans for this meeting based on the Retail Sales print.

What is economic data?

GBP/USD had initially gone bid on stronger than expected UK CPI data. As my colleague Fiona Cincotta pointed out earlier in her Two Trades to Watch, the headline print was 5.1% vs 4.7% expected and an October print of 4.2%. The core reading was 4.0% vs 3.7% expected and an October reading of 3.4%. However, as fears crept in that the Omicron variant of the coronavirus may be stronger than expected (shortly before publishing this article, the UK reported its highest one day increase in coronavirus cases ever, 78,610), the pair began moving lower. In addition, on the US open, stocks sold off in anticipation of a more hawkish FOMC, causing GBP/USD to move lower with them.

Source: Tradingview, Stone X

Trade GBP/USD now: Login or open a new account!

Levels to watch

On a daily timeframe, GBP/USD has broken higher out of a descending wedge. However, it is threatening to break back below the upper trendline of the descending wedge at 1.3200. Support below is at the December 9^th lows and the 38.2% Fibonacci retracement from the March 2020 lows to the May 2021 highs, near 1.3166. Below there is the bottom trendline of the wedge near 1.3105 and then the psychological round number support level of 1.3000. If the wedge holds and price moves higher, there are some well defined horizontal resistance levels before reaching the target (1.3513). They are at 1.3278, 1.3359, and 1.3412. The 200 Day Moving Average has also drifted below the target to 1.3492.

Source: Tradingview, Stone X

Heading into the FOMC meeting, stocks are lower, and the US Dollar is higher. Weak retail sales couldn’t push stocks higher (ie, thoughts of less tapering). Despite stronger CPI data from the UK, the high number of new coronavirus cases continues to rule GBP/USD. That may change after the FOMC meeting!

And don’t forget about the BOE meeting tomorrow!

Learn more about forex trading opportunities.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.