The British pound is steady on Monday. In the North American session, GBP/USD is trading at 1.2445, up 0.05%.

US retail sales climb 0.7%

US consumers continue to shop and spend as March retail sales was stronger than expected. Retail sales rose 0.7% m/m, up from a revised 0.9% gain in February and above the market estimate of 0.3%. Consumer spending was strong across the board, with eight of thirteen categories recording increases. Retail sales excluding gasoline and motor vehicles and parts jumped 1%, up from a revised 0.6% in February and above the market estimate of 0.4%.

The solid retail sales numbers follows inflation and nonfarm payrolls, both of which were higher than expected. These strong numbers are a clear sign that the US economy remains on a roll and that could cause the Federal Reserve to hold off for longer on rate cuts.

The markets continue to slash expectations for a rate cut in response to these robust economic releases. A Fed rate cut in June or July are unlikely, and the probability of a September cut has dropped to 65%, down from 93% just one month ago, according to the CME FedWatch tool.

The UK releases employment data on Tuesday, and the Bank of England will be keeping a close eye on wage growth, a driver of inflation. Average earnings excluding bonuses dipped from 6.2% to 6.1% in the three months to January and the BoE will want to see wage growth reined in inflation is to be beaten.

The Bank of England meets next on May 9^th and is expected to hold rates for a fifth straight time, but the BoE is divided about rate policy. Governor Bailey has said that rate cut expectations this year are “not unreasonable”, but Monetary Policy Committee members Megan Greene and Jonathan Haskel have said that rate cuts should be a long way off.

GBP/USD Technical

• GBP/USD faces resistance at 1.2535 and 1.2620
• There is support at 1.2481 and 1.2396

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