Sterling dips on weak retail sales, dollar awaits home sales data

United Kingdom: Retail sales has disappointed the expectation of increase in 0.2% MoM in retail sales ex auto fuel in June on the back of stronger consumption, around-zero inflation and rising earnings growth.

The June's retail sales negative print at 0.2% has extremely disappointed forecasts at 0.4% which is also quite below from previous flash at 0.3%, this has disrupted the sterling's gains to extend.

United States: New home sales to take a breather after reaching an eight-year high market participants will now look to today's new home sales release which after reaching an eight year high in May, should decline modestly to 535k units in June.

Our forecast for a modest correction is driven by the reported decline in housing starts in June given the close correlation between the two series. It must be noted that our fundamental outlook for new home sales is still very bullish.

As a result of above fundamental factors, The sterling dropped lower against the dollar today soon after the release of downbeat U.K. retail sales data, although hopes for a rate hike by the Bank of England later in the year continued to support.

Cable dropped to 1.5582 during early European sessions; the pair then consolidated currently at 1.5597, easing 0.09%. Cable is likely to test support around 1.5525 levels (lows of July 21^st) and resistance at 1.5671 (highs of July 17^th).