The GBPUSD pair dropped by more than 30 basis points. This drop was mostly because of the overall strength of the US dollar, which has been gaining for the past two days. The US dollar index, which measures the dollar strength against a basket of currencies rose by almost 50 basis points.
US retail sales fall
The GBP/USD pair also fell because of the challenging retail environment. Data released by the British Retail Consortium showed that sales dropped by 4.3% in March from the same month a year ago. This was the sharpest decline since the organization started to collect the data in 1995.
The retail sales were mostly affected by the lockdown that was announced in the final week of the month. The sales rose by 12 per cent in the first three weeks and then tumbled by 27 per cent in the final week.
The sales slowdown was offset by a 19 percent improvement in food sales. This was higher than the annual average of 4%.
The same data was shown by Barclayscard, which is an essential player in the country’s retail sector. The platform processes almost 50 per cent of all credit and debit card transactions. Its number showed that consumer spending declined by 6 per cent between February 22 and March 27. This was mostly driven by a drop in travel expenditure, which dropped by 40 per cent.
Lockdown extensions seen
Meanwhile, the government is making a decision on when it will reopen the economy. While the number of coronavirus cases is rising, the government believes that it is nearing a peak, according to Chief Medical Officer Chris Whitty. Dominic Raab is expected to extend the lockdown by a few more weeks.
On the four-hour chart, the upward trend of the GBP/USD pair appears to have hit a barrier between the 61.8% and 78.6% Fibonacci Retracement level. As a result, the pair has attempted to move lower but has found another support near the 61.8% retracement level. This shows that there is an indecision in the market on how the pair should react to new information.
This Fibonacci retracement is derived by connecting the highest and lowest levels in March.
Therefore, I expect the current wave of dollar strength will bring the pair lower and possibly help it retest the 50% retracement level at 1.2300.