Pound Sterling under pressure on weak retail sales
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The pound sterling (GBP) has extended its decline, trading near a six-month low of 1.2550 against the US dollar (USD) during Friday’s London session. This sell-off follows the release of weaker-than-expected UK retail sales data for October, which has amplified concerns about the UK’s economic resilience and bolstered expectations for a dovish stance from the Bank of England (BoE).
Retail sales for October showed a 0.7% month-on-month decline, significantly worse than the prior revised 0.1% gain. On an annual basis, retail sales grew by 2.4%, missing expectations of 3.4% and down from the previous revised figure of 3.2%. These disappointing figures suggest weak consumer spending, a key driver of the UK economy. With services inflation—a key BoE indicator—still elevated at 5%, the market remains uncertain about the central bank's ability to ease monetary policy aggressively.
Broader Market Influences
The US dollar (USD) has gained traction, helped by better-than-expected initial jobless claims data, which came in at 213k, against expectations of 220k. This strong data underscores the continued resilience of the US labor market and has supported the dollar.
At the same time, markets are adjusting their expectations for the Federal Reserve, anticipating fewer rate cuts in light of ongoing economic growth. With President-elect Donald Trump’s economic policies expected to boost inflationary pressures and economic growth, a more cautious Fed stance is now expected. Investors are also focused on upcoming UK composite PMI data, expected to come in at 51.8, as well as the Labor Party's first budget for further insights into private-sector performance and business sentiment in the UK.
Technical Outlook: GBP/USD
Technical indicators point to a continued bearish outlook for the GBP/USD pair. All short- to long-term exponential moving averages (EMAs) are sloping downward, confirming the bearish trend. The 14-day Relative Strength Index (RSI) remains in the 20-40 range, reflecting strong bearish momentum.
Key levels to watch include downside support at May’s low of 1.2446, which is expected to provide the next significant cushion for GBP/USD. On the upside, resistance near the November 20th high of 1.2720 will be crucial. Any recovery in the GBP will need to break this level to signal a potential reversal in the current downtrend.
Outlook and Considerations
The pound sterling remains under pressure, with weak retail sales and dovish central bank expectations weighing heavily on sentiment. While short-term market sentiment is decisively bearish, upcoming UK PMI data and market reactions to US PMI results later today could introduce new volatility. Traders should carefully monitor these developments, as they may trigger shifts in momentum and market direction.
Retail sales for October showed a 0.7% month-on-month decline, significantly worse than the prior revised 0.1% gain. On an annual basis, retail sales grew by 2.4%, missing expectations of 3.4% and down from the previous revised figure of 3.2%. These disappointing figures suggest weak consumer spending, a key driver of the UK economy. With services inflation—a key BoE indicator—still elevated at 5%, the market remains uncertain about the central bank's ability to ease monetary policy aggressively.
Broader Market Influences
The US dollar (USD) has gained traction, helped by better-than-expected initial jobless claims data, which came in at 213k, against expectations of 220k. This strong data underscores the continued resilience of the US labor market and has supported the dollar.
At the same time, markets are adjusting their expectations for the Federal Reserve, anticipating fewer rate cuts in light of ongoing economic growth. With President-elect Donald Trump’s economic policies expected to boost inflationary pressures and economic growth, a more cautious Fed stance is now expected. Investors are also focused on upcoming UK composite PMI data, expected to come in at 51.8, as well as the Labor Party's first budget for further insights into private-sector performance and business sentiment in the UK.
Technical Outlook: GBP/USD
Technical indicators point to a continued bearish outlook for the GBP/USD pair. All short- to long-term exponential moving averages (EMAs) are sloping downward, confirming the bearish trend. The 14-day Relative Strength Index (RSI) remains in the 20-40 range, reflecting strong bearish momentum.
Key levels to watch include downside support at May’s low of 1.2446, which is expected to provide the next significant cushion for GBP/USD. On the upside, resistance near the November 20th high of 1.2720 will be crucial. Any recovery in the GBP will need to break this level to signal a potential reversal in the current downtrend.
Outlook and Considerations
The pound sterling remains under pressure, with weak retail sales and dovish central bank expectations weighing heavily on sentiment. While short-term market sentiment is decisively bearish, upcoming UK PMI data and market reactions to US PMI results later today could introduce new volatility. Traders should carefully monitor these developments, as they may trigger shifts in momentum and market direction.