- GBP/USD slides to fresh six-week lows hit at 1.1791.
- Sentiment soured as traders weighed in on the Fed’s recent hawkish comments.
- Data releases from the UK were mixed as GfK’s consumer sentiment slumped while retail sales beat expectations.
The GBP/USD tumbled in the American session as sentiment turned sour as traders reassessed their reading of the Fed’s recent dovish comments. Reflecting this, US Treasury yields are rising, the dollar is on track to close at a six-week high, and global stocks are falling.
The GBP/USD pair is trading at 1.1812, after reaching a daily high at 1.1935 before falling towards daily lows at 1.1791, although it is still trading below its opening price.
As mentioned, the British Pound extended its losses, while the US Dollar Index, a gauge of the dollar’s value against its peers, rose 0.67% to 108.211. At the same time, the US 10-year bond yield rose 10 basis points to 2,994%.
The lack of US economic data released on Friday has market traders still digesting the Fed’s comments. The July FOMC monetary policy minutes were initially misread by traders, sending US equities higher sharply. , despite Fed officials repeatedly reiterating that “inflation is too high” and that it is premature to declare “victory.”
Thomas Barkin of the Richmond Fed said the balance sheet reduction should help tighten financial conditions. He commented that data on the economy has been robust, and that the labor market appears healthy as do core retail sales and industrial production.
On Thursday, San Francisco Fed President Daly said a hike of 50 or 75 basis points would be appropriate at the next meeting, adding, “I really think of the raise-and-hold strategy as a strategy that has historically given us results”, and was against rate cuts in 2023. For his part, George, from the Kansas Fed, said that although the July CPI data was “encouraging”, the arguments for a further hardening remain strong.
Later, St. Louis Fed James Bullard said he leans toward a 75 basis point hike next month, stressing that it’s too early to say inflation has peaked; while Minnesota Fed Neil Kashkari said the Fed is committed to reining in inflation, though he is not sure the Fed can bring inflation down without triggering a recession.
In the UK, economic data was mixed. UK retail sales surprised to the upside, rising 0.3%m/m in July, against expectations of a 0.2% drop. However, in the three months to July, sales fell by 1.2% and, year over year, by 3.4%.
Earlier, GfK Consumer Confidence turned in a disappointing reading for July, at -44, vs. estimates of -42, as UK citizens have to cope with twice as high household energy bills. than last year, which will increase in October.
What to watch out for
Next week, the UK calendar will reveal the August S&P Global/CIPS PMIs. In the US, the economic calendar will include the S&P Global PMIs for August, jobless claims, the Fed Economic Symposium in Jackson Hole, where Fed Chairman Jerome Powell will speak, and the Fed’s favorite inflation gauge. , the July PCE,
GBP/USD key technical levels
Source: Fx Street
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