It has been a positive day for the US markets as US retail sales m/m came in at 0.3% (0.3% exp), showing the second consecutive month of retail sales growth. Throwing further fuel into the mix the Empire manufacturing survey was up strongly to 20.1 (15 exp) showing that manufactures are also very upbeat about the economy at present. The result in turn means that markets have priced in a June rate rise as a sure thing for the US economy, and are now focused on the end of the year with September and December likely candidates for further rises during the course of the year. While they may be hopeful and 10 year yields are lifting, inflation figures have not caught up just yet to where the FED may be forced to act, but they're certainly getting close - and with all this data showing the economy expanding we can be sure to see some follow on inflation.
As a result of the rise in yields and as markets are looking to exit equities we've seen the S&P 500 come under serious pressure today. The fall so far has managed to hold up on dynamic support in the form of the 100 day moving average, however it could fall further and touch on support at 2699 in the current market environment. Any pressure through here could see it fall lower to 2664 if yields continue to rise in the long run on the back of positive data. On the flip side if the bulls come back into the market I would expect resistance at 2741, but it will be a hard level to beat in the current market environment after a very solid rejection.
The other big story today was of course the UK which had some very strong employment figures as unemployment remained at 4.2%, its lowest level since 1975, while employment figures were at record highs with 32.34 million people at work; all major positives for the UK economy. UK real wage growth was up 0.4% as well when compared to inflation figures of 2.5%, showing that the labour market is starting to tighten as skilled workers are in demand. All in all, positives pictures for the UK economy, however the Brexit questions are still unanswered and the GBP has suffered against the dollar today as the USD has strengthened against all major and minor pairs on the back of retail data. With the Brexit questions still hanging around we could see more volatility and potentially a ranging market based off the last candles.
Looking at the GBPUSD it's clear to see that it's under pressure but moving sideways as markets are struggling to find direction after the steep fall. Support so far can be found at 1.3458 and so far candles have shown smaller lower lows which could indicate a willingness to resume the trend, which in turn could lead to pressure at the next level of 1.3361. The bulls though in the market will be looking to push through resistance at 1.3575 in this instance, unless of course the USD continues its run against the majors.