- The GBP/USD pair pared some of Wednesday’s gains after breaking above the 1.2400 level.
- US economic data boosted the dollar, putting a headwind for sterling.
- UK Retail Sales were disappointing while Brexit negotiations improved, according to McGrath, the Irish Prime Minister.
The pair GBP/USD fell, as the US economic data release boosted the US dollar, which is recovering after being hit earlier in the week. Also, dismal retail sales reported in the United Kingdom (UK) was another reason to dump the British pound (GBP). At the time of writing, GBP/USD is trading at 1.2362, down 0.25%.
US data boosted the dollar
Growth continues to be the reason that drives the financial markets. In the fourth quarter, the US economy grew 2.9% quarter-on-quarter, while the third quarter saw an increase of 3.2%, according to the US Department of Commerce. By 2022, the economy expanded by 2.1%, less than in 2021, 5.9% year-on-year.
At the same time, December durable goods orders rose 5.6%m/m, recovering from November’s -2.1% contraction. On the other hand, data from the US Department of Labor showed the resistance of the labor market. Initial claims for jobless benefits for the week ending Jan. 21 fell to 186,000, below estimates of 205,000.
Therefore, the dollar index (DXY), an indicator that tracks the value of the dollar against a basket of pairs, pared Wednesday’s losses and rose 0.44% to 102.097, a headwind for GBP/USD .
Earlier, UK retail sales reported by the Confederation of British Industries (CBI) plunged in the past month at the fastest rate since April 2022, reaffirming the weak state of the UK economy. The data showed that sales plunged to -23 from the 11th in the December report. “Retailers started the new year with a return to falling sales volumes as the sector continues to face double headwinds of rising costs and declining household income,” said CBI Martin Sartorius. .
Apart from this, there was news about Brexit and it could positively affect the British pound. Irish Finance Minister Michael McGrath said Ireland and the UK share a determination to reach an agreement after meeting with Chancellor of the Exchequer Jeremy Hunt on Thursday. McGrath added that the negotiations around Northern Ireland have reached a new level and that there is a good atmosphere, although there are still some issues to be resolved.
What must be considered?
On Friday, the US economic agenda will include the Federal Reserve’s preferred inflation indicator, core personal consumption spending (PCE), whose monthly reading is estimated at 0.3%, while the annual one is forecast at 4.4%. The headline PCE data is expected at 0.1% MoM and 5.5% YoY.
GBP/USD Key Technical Levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
