We can not say that the pound stood still yesterday, although the scale of movements were quite modest. Nevertheless, oddly enough, the pound almost behaved strictly in accordance with the logic of published macroeconomic data until the end of the day. It was only some time later, after all the statistics were published, that the pound began to fall in price for some unknown reason. However, in the end, it returned to the same place where it started. And strangely enough, this very movement once again shows that in general, market participants are determined to strengthen the dollar. So the trend is still the same, it just slowed down a lot for the pound. At the same time, the pound completely ignored the happy news that Boris Johnson has fully recovered from the coronavirus and has returned to his duties as prime minister of the United Kingdom.
The pound was falling in the morning, and not without reason. It was crushed by preliminary data on business activity indices, which turned out to be noticeably worse than forecasts. In particular, the index of business activity in the manufacturing sector collapsed from 47.8 to 32.9. Setting a new anti-record along the way. But here the index of business activity in the service sector literally collapsed from 34.5 to 12.3. It is clear that this is also a record low value. As a result, all this led to a decrease in the composite index of business activity from 36.0 to 12.9. Although this is not even a decline, but a form of catastrophe. This is preliminary data for April, which means that there aren't any prospects for British businesses or imminent improvement of the situation.
Composite manufacturing activity index (UK):
The pound strengthened during the beginning of the US session due to incredibly weak American macroeconomic data. The decline in business activity indices was not as strong as in the United Kingdom. For example, the manufacturing index fell from 48.5 to 36.9. The index of business activity in the service sector decreased from 39.8 to 27.0. As a result, the composite business activity index fell from 40.9 to 27.4. All indices updated their respective record lows. But what is happening in the labor market is much more important, as unemployment grows day by day. The number of initial applications gradually decreased, and if there were 5,237 thousand last week, this time it was just 4,427 thousand. The number is considered to be about 200 thousand. So, the number of initial applications is simply prohibitive. This has been going on for five consecutive weeks. However, the worst thing is what happens with repeated applications, of which there were already 15,976 thousand and this is another record high.
The worst part is that there is a record number of both initial and repeated calls. But in the end, we clearly see that unemployment is not just becoming widespread. It only lingers. At the same time, those who are unemployed continue to grow in numbers. But this was not the only negative news for the United States. Sales of new homes collapsed by 15.4% in March. Most likely, judging by what is happening on the labor market, the recession will only continue in April. However, after the publication of all these data, the dollar began to strengthen again. This is due to the fact that, from the point of view of large investors, the dollar is still the most attractive. From their point of view, if everything is so bad in the United States, then it will be even worse in other countries. Moreover, many believe that the global economic recovery will begin with the United States. So it's better to transfer your funds in advance to where they will begin to make a profit earlier.
Repeated Unemployment Insurance Claims (United States):
The pound again behaved strictly in the logic of recent macroeconomic data and has already gone down today. The reason is extremely simple - retail sales, which showed zero growth in April, showed a 5.8% decline in March. And this is in annual terms, so the decline in consumer activity is extremely significant.
Retail Sales (UK):
However, the US session could open the same way it did yesterday, which means that the pound will strengthen. The fact is that the volume of orders for durable goods in the United States could fall by 12.0%. Such a significant decline indicates that the industry will continue to decline. In addition, it is worth waiting for a further decline in retail sales. So the economic situation will only worsen. But the dollar can win back all its losses near the end of trading. Exactly for the same reasons why it grew last night.
Durable Goods Orders (United States):
In terms of technical analysis, we see focus at the level of 1.2350 for several consecutive days, where a variable range of 1.2315/1.2370 was formed. In fact, this is a kind of accumulation, which will lead to subsequent acceleration.
Considering the trading chart in general terms, the daily period, a partial recovery is visible in the direction of the main trend, but the quote is still at a conditional peak of inertia on 03.20.20-14.04.20.
It can be assumed that the existing stagnation, which stretches along the level of 1.2350, will soon end, and acceleration will replace it. If you analyze with respect to the bars, then prices will develop in a downward direction that looks attractive. In this case, we need to consolidate below 1.2315, where the prospect of the move is in the face of the April 21 low at 1.2246 (1.2250).
From the point of view of complex indicator analysis, we see a sell signal relative to all the main time intervals.
