- GBP / USD broke below 1.3800 due to weaker than expected UK retail sales.
- Market sentiment is positive, but the British pound was unable to capitalize on its risk-sensitive state.
The GBP/USD down for the second day in a row, down 0.18%, trading at 1.3768 during the American session at the time of writing this article. Worse than expected, UK retail sales data pushed the pair toward Thursday’s low of 1.3776, but it bounced away and failed to break above 1.3800.
Market sentiment is bullish, with the US S&P 500 hitting new all-time highs, while other major US equity indices are up 0.17% to 0.33%, except for the Nasdaq Composite, which is down. 0.36%.
The GBP was unable to extend its rally beyond 1.3800 amid market risk sentiment and a weak dollar.
The British pound was unable to capitalize on favorable market sentiment amid the weakness of the US dollar across the board. The US dollar index, which tracks the performance of the dollar against a basket of its peers, loses 0.20%, stands at 93.58, supported by falling yields, for the first time this week, losing a basis point, currently at 1.658% after hitting a weekly high of around 1.70%.
On the macroeconomic front, the UK agenda featured Retail Sales for September, which contracted 0.6% monthly, worse than the 0.2% expansion expected by analysts. In addition, the annual figure plummeted 2.6% compared to a -1.7% estimated by investors. According to the National Office of Statistics, people reduce their spending in home top stores (-9.3%), such as furniture and lighting stores, which was the engine of the drop in the figure.
Turning to more UK economic data, the IHS Markit Manufacturing Purchasing Managers Index unexpectedly improved to 57.7 in October from 55.8 expected and 57.1 – final September reading. GBP / USD rose on the news, pulling away from the day’s lows and briefly breaking the 1.3800 figure.
Across the pond, the US economic record revealed the IHS Markit Manufacturing and Services PMI for October, which offers mixed figures. The manufacturing market PMI rose to 59.2, down from the estimated 60.3. As for the Markit Services PMI, it grew to 58.2 above the expected 55.1.
Federal Reserve Chairman Jerome Powell is making remarks. Investors’ attention is focused on the words of the Fed chairman, waiting for clues or clues about the gradual reduction of bonds, monetary policy or inflation.
GBP / USD Price Forecast: Technical Outlook
The 1 hour chart shows the pair briefly trading above Thursday’s lows (1.3775) as Jerome Powell takes center stage. In case of some aggressive comments, Wednesday’s low at 1.3742, followed by Tuesday’s low at 1.3720, would be support levels for US dollar purchases, to account for them. On the upside, the 1.3800 figure, followed by the weekly high around 1.3838, are resistance levels for GBP / USD traders.