Forex - GBP/USD trims gains after strong U.S. retail sales

The pound pulled back from session highs against the dollar on Wednesday, as data showing that U.S. retail sales rose more than expected last month boosted confidence in the country’s economic recovery.

GBP/USD pulled away from 1.4982, the pair’s highest since March 8, to hit 1.4949 during European afternoon trade, still up 0.32% for the day.

Cable was likely to find support at 1.4830, Tuesday’s low and the pair’s lowest since June 2010 and resistance at 1.5046, the high of March 8.

The Commerce Department said U.S. retail sales rose 1.1% in February, beating expectations for a 0.5% increase. 

Core retail sales, which exclude automobile sales, also rose more-than-expected, climbing 1.0% compared to expectations for a 0.2% gain. 

The data fuelled optimism that the recovery in the U.S. is gaining traction after data last week showed that the economy added more jobs than expected in February, bringing the unemployment rate to a four-year low of 7.7%.

The pound hit session highs against the dollar earlier as investors locked in profits after the dollar touched two-and-a-half year highs against sterling on Tuesday.

Official data on Tuesday showed that U.K. manufacturing and industrial output slumped in January.

The unexpectedly weak data, together with recent poor data on construction and manufacturing reinforced concerns over the possibility of a triple-dip recession and fuelled speculation that the Bank of England will restart its asset purchase program.

Elsewhere, the pound hit session highs against the euro, with EUR/GBPdropping 0.79% to 0.08676.

The euro remained under pressure after Italy saw the yield on three-year bonds rise to the highest level since December at the first auction of the country’s debt since a one-notch downgrade by Fitch’s ratings agency last week in the wake of inconclusive elections.

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