GBP USD slides on negative UK retail sales low US unemployment claims

GBP/USD (daily chart shown below) slid early on Thursday after data releases in the UK and US pressured the pound and prompted another surge in the dollar. Thursday’s GBP/USD drop gave back much of the gains made initially on Wednesday that were triggered by the Bank of England releasing its Monetary Policy Committee minutes.

Retail sales data from the UK on Thursday showed an unexpected decline in June of 0.2% from May. Analysts had expected a 0.4% increase. In addition, unemployment claims in the US were also released on Thursday, showing a plunge in jobless claims to 255K last week, the lowest in four decades. Analysts had been expecting 279K claims.

This combination of vital economic data from both countries drove the GBP/USD back down to its 50-day moving average and the lows of the tight trading range that has been in place for the past week. The drop has also brought the currency pair closer to its key 1.5500 psychological support level.

The current range-bound price action has been the result of shifting speculation regarding both UK and US interest rate hikes. Both the Bank of England and the Fed have signaled intentions to raise rates, but the timing of such hikes have been uncertain.

As it currently stands, GBP/USD continues to trade within a moderately bearish range. With any breakdown below the noted 1.5500 psychological support level, the currency pair could drop back down towards its 200-day moving average, where a one-month low was established just two weeks ago. Below the 200-day average is a major downside support target at 1.5200, which is the area of the early June lows.

To the upside, short-term resistance within the context of the current trading range remains around the 1.5675 level.