Pound trend line still intact as market awaits retail sales

Pound has recovered sharply from its post inflation slump, however bulls are struggling to break above 1.558-1.56 area.

Retail sales might turn out as make or break event for pound.

Why pound is major contender for upside?

• Pound has slumped post inflation data, which showed headline inflation has fallen to negative territory for first time since 1960. However, core inflation is headed down bur still quite above zero mark at 0.8%.

• Moreover Bank of England Governor Mark Carney, has issued warnings several times that inflation might fall to negative territory this summer, however that will not be sufficient condition for bank of England to provide additional stimulus.

So Pound now stands on, how economy performs, regardless of what inflation reading is and how much strength dollar can pose.

• On basis of that, it can be said that dollar is in defensive today, given FOMC minutes last night almost diminished June hike possibility. So stronger retail sales might push pound pretty higher. Retail sales for April is expected at 8:30 GMT. March saw 4.2% growth y/y and today it is expected a bit softer around 3.8%.

Pound is currently trading at 1.558 against dollar.

Pound has yet not broken its upward moving trend line from 1.455, and as of now hovering just at it. Stronger retail sales would be enough for bulls to take cue from and push pound higher.