BRITISH POUND, GBP/USD, US DOLLAR, ENERGY, COMMODITIES - TALKING POINTS

• The British Pound weakened after data but managed to hold some levels
• Energy commodities calmed down today, as did most asset classes in Asia
• With FOMC next week, is this a quiet before the price wrecking storm?

The Great British Pound moved lower after US and domestic data today. Energy commodities took a breather in the Asian session, as did most equity, bond and currency markets.

The US Dollar gave up some ground in the Asian session after rallying in the US as the stellar US retail sales number of 0.7% m/m for the month of August defied expectations of

-0.7%. This is on the back of last month’s -1.1%, which was revised to -1.8%.

Energy commodities have seen moves to elevated prices this week due to severe capacity concerns remaining in several key pockets of the global supply chain. Namely, the Mexican Gulf storm season, the English Channel power connection outage and shipping bottlenecks.

The Baltic freight index is showing the cost of transporting energy commodities at the most expensive in 13 years. With the oncoming Northern Hemisphere winter and Western Pacific typhoon season ahead, markets are nervous about the impact on growth amid high inflation. Several parts of Asia have seen the cost of power rise to the point of being forced to shut down some factories.

GBP/USD moved slightly lower again after UK retails sales disappointed at -0.9% m/m for the month of August. This print came in well below the forecast 0.5% and a previous reading of -2.5% that was revised down to -2.8%.

Looking ahead, today the University of Michigan consumer sentiment data will be closely watched, but the FOMC meeting next Thursday remains in front of mind for markets.

GREAT BRITISH POUND TECHNICAL ANALYSIS

GBP/USD has been trading in a range for 2 months between a low of 1.3572 and a high of 1.3982. These levels may now provide support and resistance respectively, should they be tested.

More recently, the high of 1.3913 could offer resistance while the previous lows of 1.3725 and 1.3600 might provide support. The very recent low of 1.3763 is a trend line currently at 1.3770 may provide support.

Chart created in TradingView

Written by Daniel McCarthy, Strategist for DailyFX.com. 17 September 2021