GBP/USD climbs 0.34%, supported by better-than-expected U.K data

Summary:

GBP/USD climbed by 0.34% to 1.3876 in Friday's trading session, reversing the previous three days of declines.

GBP/USD climbed by 0.34% to 1.3876 in Friday’s trading session, reversing the previous three days of declines.

Retail sales data out of the U.K reinforced the view that the British economy has now turned the corner. The successful Covid-19 vaccination rollout and the gradual re-opening of the economy lend support to the improving economic outlook.

Consumer spending for the month of March improved considerably. The gauge showed a rise in spending of 5.4% compared to the previous month. This reading was materially higher than the consensus analyst estimates of 1.5% higher MoM.

As restrictions are lifted in the months ahead we can expect to see consumers flooding back to the high street. This should provide a continued tailwind for the UK economy.

Friday’s move higher came on the back of a volatile trading week for the GBP/USD pair. The Pound started the week with its best one-day performance for some time, adding 1.3% against the greenback to close at 1.3985. This prompted an assault on the psychologically important 1.40000 level. Technical selling emerged at this resistance, forcing the Pound sharply lower by 1.3% by Thursday’s close before recovering the following session.

Next week offers little in the way of data from the U.K. Traders should pay close attention to the FOMC interest rate decision on Wednesday, followed by the U.S GDP data release on Thursday.

GBP/USD Technical outlook

Currently trading at 1.3876, support can be found at the lower end of the ascending trend channel around 1.4750. A breach of this line could see further liquidation, taking GBP/USD to the double-bottom low from March 2021, at 1.3670.

Bulls could look at add positions into the support areas. However, the bull thesis will be negated on a close below 1.3670.

On the upside, resistance can be found at 1.4000. A close above this level could see a continuation of Sterling’s strength. The next logical target would be February’s three-year high of 1.4241.