Cable ran into a brick wall ahead of 1.9780 (yesterday's six-week peak) after rallying on the back of much better-than-expected 09:30GMT UK retail sales data. A bout of profit-taking on long GBP/USD positions was blamed for the subsequent half-cent+ drop to an intra-day low of 1.9709.
UK December retail sales came in +1.1% m/m, +3.7% y/y, against forecast increases of 0.5% m/m, and 3.2% y/y. The very strong numbers increase the risk of another 25bp UK base rate hike to 5.5% as early as next month (Feb 8). 1.9700, 1.9680, 1.9650, and 1.9636 (yesterday's floor) are noted support points south of 1.9709.
Offers are touted at 1.9780, inclusive of Swiss interest, with further sell orders flagged up at 1.9800. Bull targets/resistance levels above include 1.9849 (Dec 1, 14-year high), 1.9900, and 2.00. January's preliminary Michigan Sentiment index will be revealed at 15:00GMT.
Forecast: 92.5. Next week's key UK event risk is Wednesday's publication of minutes from last week's BoE MPC meeting, at which the UK base rate was unexpectedly raised by 25bp to 5.25%.
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