GBP/USD slides to over one-month low, below 1.1800 mark amid sustained USD buying

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GBP/USD slides to 1.2350 on downbeat UK Retail Sales and Fed concerns – Crypto News

Published

3 years ago

January 20, 2023

Dripp

GBP/USD renews intraday low while snapping three-day uptrend after key UK data.
British Retail Sales slumped to -1.0% MoM in December versus 0.5% expected and -0.4% prior.
Hawkish Fedspeak allows US Dollar to pare recent losses despite downbeat US data.
Upbeat comments from BOE’s Bailey, JP Morgan’s upbeat outlook for UK economy put a floor under the Cable price.

GBP/USD takes offers to refresh intraday low near 1.2350 as UK Retail Sales disappoint during early Friday. It’s worth noting, however, that the recently hawkish comments from Bank of England (BoE) Governor Andrew Bailey and upbeat forecasts from JP Morgan seem to put a floor under the cables pair.

UK Retail Sales for December marked a contraction of 1.0% MoM compared to market expectations favoring 0.5% growth and -0.4% previous readings. Given the UK Retail Sales’ lion’s share in the British Gross Domestic Product (GDP), the GBP/USD drops after the key data.

Also read: UK Retail Sales fall 1.0% MoM in December vs. 0.5% expected

On Thursday, Bank of England (BoE) Governor Andrew Bailey noted, “Fall in the December inflation is the beginning of a sign that a corner has been turned.” The policymaker also adds that they think there will be a recession while also stating that the recession will be a shallow one by historical standards.

Elsewhere, JP Morgan came out with an upbeat Outlook for the Q2 2023 UK interest rate, to 4.5% versus 4.25% prior estimation. On the same line, the investment bank estimates the UK Fiscal Year 2023 (FY2023) GDP growth to improve to -0.1% versus -0.3% previous forecasts.

It should be observed that the talks of fuel duty cut in the UK and expectations of no more tax relief to the rich ones in Britain in the next budget seem to probe the GBP/USD traders.

On a different page, the US Dollar Index (DXY) consolidates the previous day’s losses, the biggest in over a week, as Fed policymakers favor higher rates during their last public appearances before the 15-day silence period ahead of the February Federal Open Market Committee (FOMC) meeting. Even so, mixed US data probe the GBP/USD bears. That said, the US Unemployment Claims dropped to the lowest levels since late April 2022 and the Philadelphia fed Manufacturing Survey Index also improved. However, US Building and Housing Starts joined the previously released downbeat US Retail Sales and Producer Price Index (PPI) to propel fears of a recession in the world’s largest economy, earlier backed by softer wage growth and activity data from the US.

Amid these plays, the key US Treasury bond yields struggle to extend the previous day’s rebound from the multiday low while the S&P 500 futures print mild gains. That said, shares in the Asia-Pacific region trade is mixed at the latest.

As a result, the GBP/USD pair is likely to remain sidelined even as bears have started witnessing welcome notes of late.

technical analysis

GBP/USD retreats from a downward-sloping resistance line from May 2022, around 1.2400 by the press time. Even so, the pair’s successful trading beyond the two-week-old ascending support line, close to 1.2315 at the latest, keeps buyers hopeful.