- GBP/USD will end the week with losses of more than 1.50%, pending the decisions of the Bank of England and the Federal Reserve.
- The University of Michigan Consumer Sentiment improved from last month’s reading, while inflation expectations eased.
- UK retail sales raised concerns about the country’s recession amid a change in government.
The GBP trimmed its earlier losses against the dollar, having hit a 37-year low around 1.1350, and rebounded back to the 1.1400 threshold after posting weaker-than-expected retail sales, fueling speculation that the UK would enter in recession At the time of this writing, GBP/USD is trading at 1.1395, down 0.62% from its opening price.
Risk aversion keeps most G8 currencies affected. The USD trimmed some earlier losses, as shown by the US Dollar Index, which trades sideways around 109.704, shedding 0.04%. US economic data released by the University of Michigan showed that US consumers remain slightly optimistic about the country’s economy. Consumer sentiment in September rose to 59.5, one point below estimates but better than the 58.6 reached in August.
Joanne Hsu, director of the UoM survey, said: “Following the marked improvement in sentiment in August, consumers showed signs of uncertainty about the path of the economy.” In the same report, one-year inflation expectations fell to 4.6%, from 4.8% in August.
Meanwhile, US economic data released in September reinforces the case for a 75 basis point Federal Reserve rate hike in the coming week. In addition, sources quoted by Bloomberg commented that the US central bank could go higher in November.
Separately, the UK docket revealed that retail sales in August slumped more than the estimated 0.5% contraction, falling 1.6% mom, raising recession fears amid a tightening cycle by the Bank of England.
Meanwhile, UK Prime Minister Liz Truss last week announced an energy bill that will cap energy prices for two years, likely to cost an estimated £100bn.
What must be considered
The UK economic docket will include the Bank of England’s monetary policy decision next week. Money market futures expect a 50 basis point rise, but pressures are mounting for the central bank to hike 75 basis points. In the US, the Federal Reserve is expected to raise rates by 75 basis points, with little chance of reaching one percentage point.
GBP/USD key technical levels
|Last Price Today||1.1398|
|Today’s Daily Change||-0.0068|
|Today’s Daily Change %||-0.59|
|Today’s Daily Opening||1.1466|
|20 Daily SMA||1.1634|
|50 Daily SMA||1.1884|
|100 Daily SMA||1.2118|
|200 Daily SMA||1.2713|
|Previous Daily High||1.1556|
|Previous Daily Minimum||1.1462|
|Previous Maximum Weekly||1.1648|
|Previous Weekly Minimum||1.1405|
|Monthly Prior Maximum||1.2294|
|Previous Monthly Minimum||1.1599|
|Daily Fibonacci 38.2%||1.1498|
|Daily Fibonacci 61.8%||1,152|
|Daily Pivot Point S1||1.1433|
|Daily Pivot Point S2||1.14|
|Daily Pivot Point S3||1.1338|
|Daily Pivot Point R1||1.1527|
|Daily Pivot Point R2||1.1589|
|Daily Pivot Point R3||1.1622|
Source: Fx Street