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GBP / USD remains confined to a range around 1.3800

  • GBP / USD lacked a firm directional bias and remained confined to a range on Friday.
  • Upbeat UK PMIs offset dismal retail sales figures and supported the pound.
  • The USD’s renewed sell bias extended support further, although the bulls lacked conviction.

The pair GBP/USD it lacked a firm directional bias and ranged from tepid gains to minor losses, around 1.3800 during the mid-European session.

The pair witnessed some intraday selling and fell to two-day lows near the 1.3770 area in reaction to dismal UK retail sales figures, which unexpectedly fell 0.2% in September. Excluding auto motor fuel sales, core retail sales are down -0.6% month-on-month adding to signs of weakness in the economic recovery.

This is due to softer UK consumer inflation figures released earlier this week and dashed hopes of an imminent rate hike by the Bank of England in November. This turned out to be a key factor that weighed on the British pound and put some downward pressure on GBP / USD, although the decline seemed muffled.

Investors, however, appear to be convinced that the Bank of England will eventually raise interest rates from record lows before the end of this year. This, coupled with the stronger-than-expected UK PMI figures for October and the renewed selling bias of the US dollar, helped limit the decline, rather helped the GBP / USD pair to find some buyers at lower levels. .

Meanwhile, reports that giant Evergrande made funds available for a bond coupon to a trustee account helped ease concerns about a credit crunch in China’s real estate sector. This was seen as a key factor that did not help the safe-haven dollar capitalize on the good rally the day before from the three-week lows.

That said, the high yields on US Treasuries prevented investors from making aggressive bearish bets on the USD and limited the rise of the GBP / USD pair, at least for now. In fact, the benchmark 10-year US government bond yield was stable just below the 1.70% threshold, or the highest level since May touched on Thursday.

Growing market acceptance that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation continued to act as a tailwind for US bond yields. Therefore, the focus will remain on the comments of Fed Chairman Jerome Powell during a virtual press conference later this Friday.

This, along with US bond yields and broader market risk sentiment, will influence USD price dynamics and provide some boost to GBP / USD.

Technical levels

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