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The GBP/USD currency pair is struggling to continue its upward trend today. During the Asian session on Monday, the pair is trading around 1.2160.
However, after the release of disappointing UK Retail Sales data for September on Friday, this currency pair is facing obstacles. The British Pound (GBP) managed to recover from its losses against the weakening US Dollar (USD).
Monthly Retail Sales showed a decline of 0.9%, differing from the expected decrease of 0.1%, after a slight increase of 0.4% in August. On a year-on-year basis, sales contracted by 1.0%, against market predictions that projected stagnation.
This drop in Retail Sales indicates that households are facing financial pressure due to high inflation and rising borrowing costs. A significant decline in consumer spending is likely to have a considerable impact on inflation expectations felt by consumers.
As a result of this drop in spending, there is speculation that the Bank of England (BoE) may maintain the current interest rate at 5.25% during its November policy meeting.
The US Dollar Index (DXY) is attempting to recover from its recent decline, possibly driven by strong economic data from the United States (US).
Additionally, optimistic yields on US Treasury securities provide the necessary support to strengthen the US Dollar (USD), with the 10-year US Treasury yield at 4.96%, an increase of 0.92% at the time this information was compiled.
Federal Reserve (Fed) Chair Jerome Powell, in his statement on Thursday, indicated that the central bank does not plan to raise interest rates soon, providing support to the GBP/USD pair.
Powell also expressed that if there are signs of further growth or if the labor market stops improving, tighter monetary policy measures may be needed.
Atlanta Fed President Raphael Bostic stated on Friday that he believes the US central bank will not lower interest rates before the middle of next year. Meanwhile, Philadelphia Fed President Patrick Harker reaffirmed his intention to keep interest rates unchanged.
Moreover, Cleveland Fed President Loretta Mester suggested that the US central bank is already at the peak of the rate hike cycle. However, Mester acknowledged that data released the previous week could still influence the central bank's future monetary policy decisions.
Market participants will closely monitor the US S&P Global PMI on Tuesday, followed by the Third Quarter Gross Domestic Product (GDP) data on Thursday and the Core Personal Consumption Expenditures (PCE) data on Friday. In the UK economic calendar, attention will also be focused on changes in Claimant Count, Employment Change, and the S&P Global/CIPS PMI.
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Warning!
This analysis is based on fundamental and technical perspectives from trusted sources and does not constitute advice or solicitation. Always remember that this content aims to enrich readers' information. Always conduct your own independent research regarding other forex information as a reference for your trading.
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