UK Prices Cool, US Dollar Strengthens

In July, British store chain prices experienced the slowest annual increase this year, with shop price inflation cooling to 7.4%, down from 8.4% in June, according to data from the British Retail Consortium (BRC). Notably, prices fell month-on-month for the first time in two years. The BRC's inflation measure, which encompasses in-store goods, is considered a leading indicator for the broader official consumer price index that includes services and energy costs. Clothing and footwear were the major factors driving down shop prices in July, and food price inflation reached its lowest level of the year.

Adding to economic concerns, British retail sales fell at the fastest rate since April 2022 in July. Many store chains have started reducing orders placed with suppliers. Additionally, the housing market faced challenges, as British house prices experienced the sharpest decline since 2009 in the 12 months leading to July. The drag was attributed to rising interest rates on the housing market. While the most recent official data revealed that Britain's inflation rate experienced a larger-than-anticipated decrease in June, marking its slowest pace in over a year at 7.9%.

Economists were expecting the Bank of England to increase interest rates from 5% to 5.25%, despite inflation cooling down. The U.S. dollar demonstrated strength against major currencies due to positive data on U.S. manufacturing and construction in June. Despite a decline in job openings, the tight labor market conditions may lead the Federal Reserve to maintain higher interest rates for an extended period.

The labor market showed resilience with three consecutive monthly declines in layoffs. However, the JOLTS report indicated that workers had less confidence in the labor market, as resignations dropped significantly. This decline in job changes could result in slower wage growth and overall inflation.

Although the ISM survey offered a cautious view of U.S. manufacturing conditions, hard data indicated some improvement in the sector. Factory production rebounded in the second quarter after two consecutive quarterly declines.

Overall, economic indicators in both the UK and the US pointed to mixed conditions in July, with inflationary pressures in the UK easing slightly, but concerns persisting in the housing market and retail sector. In the US, while the manufacturing and construction sectors showed signs of improvement, the labor market's mixed performance raised some uncertainties about future economic trends. Consequently, it is anticipated that the US dollar will likely experience slightly more appreciation compared to the British pound during this time.

Data for Technical Analysis (5H) CFD GBP/USD

Resistance : 1.2799, 1.2807, 1.2821

Support : 1.2771, 1.2763, 1.2749                                 

5H Outlook

Source: Investing.com   

Buy/Long 1 If the support at the price range 1.2761 - 1.2771 is touched, but the support at 1.2771 cannot be broken, the TP may be set around 1.2800 and the SL around 1.2756, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.2799 - 1.2809, TP may be set around 1.2825 and SL around 1.2766, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.2799 - 1.2809 is touched, but the resistance 1.2799 cannot be broken, the TP may be set around 1.2764 and the SL around 1.2814, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.2761 - 1.2771, TP may be set around 1.2745 and SL around 1.2804, or up to the risk appetite.       

Pivot Points Aug 02, 2023 03:00AM GMT

Sources: Investing 1, Investing 2