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GBP/USD dips as UK growth stallsThe British pound has lost ground on Thursday. GBP/USD is trading at 1.2760 in the North American session at the time of writing, down 0.29% on the day. The UK economy showed no growth in April, which was in line with expectations but below the March reading of 0.4% m/m. This was the weakest reading in four months, as manufacturing and construction declined, offsetting the rise in services. Yearly, GDP rose 0.6% in April, down from 0.7% in May and in line with expectations. April showers dampened consumer spending as the UK economy continues to struggle. With a national election taking place on July 4th, politicians will be monitoring and making use of every economic release. The ruling Conservatives are trailing badly in the polls and today’s weak GDP could well be another nail in the coffin for the Conservatives. The Bank of England meets next week but there is little chance a rate cut in the middle of an election campaign. The markets have priced in an initial rate cut in September, although an August cut is a possibility, when the BoE releases quarterly growth and inflation forecasts. The advantage of waiting till September is that the Fed may cut at its September meeting, which is a day before the BoE meets. If the Fed does trim rates, then a BoE cut would not have as much negative impact on the British pound. In the US, May inflation decelerated. The headline figure fell from 3.4% y/y to 3.3% and the core rate dropped from 3.6% to 3.4%. The Federal Reserve held the benchmark rate, as expected, but noted that inflation was moving closer to the 2% target. The Fed remains cautious and has signaled just one rate cut before the end of the year. The probability of a quarter-point cut in September is 61%, according to CME’s FedWatch. GBP/USD is testing support at 1.2796. Below, there is support at 1.2733 1.2862 and 1.2925 are the next resistance lines
by OANDA
GBP/USD shrugs as UK unemployment rises, GDP nextThe British pound is drifting on Tuesday. GBP/USD is trading at 1.2720 in the European session at the time of writing, down 0.08% on the day. The UK released the May employment report earlier today. Next up is GDP on Wednesday, with a market estimate of 0% m/m for April, following a 0.4% gain in March. Today’s UK employment report indicated that the labor market continues to cool down, with a notable rise in unemployment. Claimants for unemployment benefits jumped by 50.4 thousand in May, up sharply from a revised 8.4 thousand increase in April and higher than the market estimate of 10.2 thousand. The unemployment rate ticked up to 4.4% in the three months to April, up from 4.3% in the previous period and the market estimate of 4.3%. Job growth continued to slow, falling by 139,000. Wage growth in the private sector, a key gauge for the central bank, fell to 5.8%, its lowest level since mid-2022. The drop in wage growth was impressive as the government hiked the minimum wage by 9.8% in April and there were concerns that sharp increase would send wage growth higher. The job numbers will be a relief for the Bank of England, which needs to see a weaker labor market in order to start lowering rates. There won’t be a rate cut at the next meeting in June due to the national election on July 4th. The markets have fully priced a quarter-point cut by November and the employment report has raised the likelihood of a second cut before the end of the year to 40%, up from 20% on Monday, prior to the employment report. During the election campaign, BoE policy makers have cancelled all speeches and public appearances, which means there won’t be any feedback from the BoE about today’s inflation report and other key data over the next several weeks. GBP/USD is putting pressure on resistance at 1.2745. Above, there is resistance at 1.2795 1.2671 and 1.2621 are providing support
by OANDA
Key factors for EUR/GBP trade next week Key factors for EUR/GBP trade next week With a European Central Bank (ECB) decision due next week, a trade in the GBP/EUR could be of interest. Presently, the EUR/GBP is trading at the lowest rate since August of 2022. The divergence in monetary policy between the ECB and the Bank of England (BOE) is what could be driving this weakness in the EUR. E ECB President Christine Lagarde has recently expressed confidence that Eurozone inflation is under control, hinting at a possible interest rate cut next month. The same level of dovishness is not yet seen in the language of the BOE officials. Additionally, the GBP/EUR pair could be influenced by changes in the U.S. dollar. The pound typically exhibits greater sensitivity to shifts in risk sentiment compared to the euro. A softening U.S. dollar, potentially stemming from upcoming U.S. jobs data, might further strengthen the pound against the euro. Intraday bias for the GBP/EUR pair remains neutral, with potential for more consolidations. Across the week, we get the US JOLTs Job Openings, ADP Employment Change, and the all-important Nonfarm Payrolls (NFP). Last month’s NFP reported 175,000 jobs added in April 2024, down from 315,000 jobs added in March, and falling well short of expectations for 240,000. This month's forecast is for even fewer, at 150,000 jobs. Bear in mind, any surprising strength in U.S. job data or a more hawkish tone from the BOE could lead to different trading dynamics.
by BlackBull_Markets
GBP/USD shrugs as UK inflation higher than expectedThe British pound edged higher earlier today but has pared most of those gains. GBP/USD is trading at 1.2703, up 0.06% early in the North American session. UK inflation fell sharply in April, falling to 2.3% y/y. This was down from 3.2% in March and the lowest rate since July 2021 but higher than the market estimate of 2.1%. On a monthly basis, inflation dropped to 0.3%, down from 0.6% in March and just above the market estimate of 0.2%. Food prices fell while higher gasoline prices and services inflation contributed to upward pressure on CPI. Core CPI eased to 3.9% y/y, down from 4.2% in March but above the market estimate of 3.6%. The monthly reading surprised with a 0.9% gain, higher than the March gain of 0.6% and above the market estimate of 0.7%.GBP The inflation report was on the whole positive but the rise in April core CPI left investors with a sour taste and dampened expectations for rate cut in June. The money markets have lowered pricing of a June rate cut to just 18%, compared to 50% on Tuesday. The Bank of England has made inflation its number one priority and can point to an inflation rate that is closing in on the 2% target, after hitting a high of 11.2% in October 2022. The private sector is groaning under the weight of interest rates at 5.25% and the BOE has signaled that a rate hike is a possibility this summer but may have to delay an initial rate cut to August, as inflation remains sticky. In the US, we’ll get a look at the FOMC minutes of the meeting earlier this month. The minutes may provide insight into the mood of FOMC members. Based on the message that the Fed has been steadily feeding the markets, the minutes will likely be hawkish. The markets have priced in a rate hike in September but Fed members have pointed to high inflation as a reason to maintain rates in restrictive territory until there is clear evidence that inflation will remain sustainable around the 2% target. There is support at 1.2641 and 1.2570 1.2772 and 1.2843 are the next resistance lines
by OANDA
GBP/USD higher with eye on employment reportThe British pound is slightly higher on Monday. GBP/USD is up 0.20%, trading at 1.2549 in the European session at the time of writing. The UK labor market has held up well despite high interest rates but cracks have appeared and Tuesday’s job report is expected to be soft. Employment change is expected to slide by 215,000 in the three months to March, after declining by 156,000 in the previous release.UK wage growth including bonuses is forecast to fall to 5.3%, down from 5.6% and the unemployment rate is expected to creep up to 4.3%, up from 4.2%. The Bank of England will be keeping a close eye on Tuesday’s employment report. A decline in employment and wage growth will indicate that the labor market continues to cool down which could complicate the BoE’s plans to lower interest rates. The UK ended last week on a high note, as GDP grew 0.6% q/q in the first quarter, higher than the 0.4% market estimate. The stronger data still left a question mark about the central bank’s rate path, as the market pricing of a rate cut in June is around 48%. BoE Governor was non-committal about a June hike at his press conference at last week’s policy meeting. Still, Bailey didn’t rule out a June hike and said that he was “optimistic that things are moving in the right direction”. In the US, the University of Michigan consumer confidence index fell to 67.4 in May, compared to 77.2 in April and shy of the market estimate of 76.2. One-year inflation expectations rose from 3.2% to 3.5%, which indicates that consumers are less confident about inflation receding. GBP/USD tested support at 1.2522 earlier. Below, there is support at 1.2449 1.2597 and 1.2680 are the next resistance lines
by OANDA
Pound shows little reaction as BoE holds ratesThe British pound is showing limited movement on Thursday. GBP/USD is up 0.15%, trading at 1.2515 in the North American session at the time of writing. The Bank of England kept the cash rate unchanged at 5.25% for a sixth straight time in a widely expected move. The British pound dropped slightly after the announcement but then recovered. The breakdown of the vote by the nine members of the MPC was noteworthy, as two members voted for a 0.25% cut, with seven voting to hold rates. At the April meeting, the vote was eight members in favor of a hold and one voting to cut rates by 0.25%. The meeting minutes made reference to the split vote and also noted a “range of views” among MPC members over inflation risks. Governor Bailey still has a solid majority but if additional MPC members veer away from Bailey’s stance, it will complicate his job and could affect his credibility. The markets were hoping that the BoE would use today’s meeting to signal a rate cut in June, much in the way that the European Central Bank essentially confirmed a June rate cut at its April meeting. Bailey said that “a change in the bank rate in June has neither been ruled out or a fait accompli”. Bailey also stated that the BOE could start to cut before the Federal Reserve, which has delayed plans to lower rates due to rising inflation in the US. The BoE would prefer to have the Fed move first, otherwise a BoE rate cut will hurt the British pound which could result in higher inflation. The Fed has put the brakes on plans to lower rates as inflation as proved stickier than expected. Fed members have said that monetary policy needs to remain restrictive and Boston Fed president Susan Collins said on Wednesday that inflation will take more time to fall than expected and added “there is no pre-set path for policy”. The Fed has been pouring cold water on rate cut expectations although the markets still expect two rate cuts before the end of the year. GBP/USD dropped below support at 1.2468 and put pressure on support at 1.2440 1.2497 and 1.2525 are the next resistance lines
by OANDA
BREAKOUT or FAKEOUT?? - EGHere I have EUR/GBP on the 4 Hr Chart! Ever since its visit at the Support Zone @ ( .8534 - .8528 ), Price has been steadily making Higher Highs and Higher Lows with the most significant High in the Price Action being Friday's High reaching the Resistance Zone @ ( .8586 - .8581 ) on the release of LOWER than expected NFP numbers for USD ( 175K Actual - 238K Forecast ) Now not only did we get an enormous Bullish Break on Friday, but by market close, most of those gains were given back bringing Price back to the cycle of Highs it broke AND a Minor Support Zone. So .. Is this a BREAKOUT or a FAKEOUT?! I think to answer this question, it will come down to the Fundamentals as of late! I believe EUR started to slightly overpower GBP Mar. 21st when BOE decided to HOLD their Interest Rates @ 5.25% Then, Apr. 17th GBP gets the HOTTER than expected CPI of 3.2% with BOE Bailey making the comment that Inflation looks to have quite a STRONG DROP in May ... Followed by a very disappointing Retail Sales read of 0% on Apr. 19th .. -COULD THIS MEAN GBP WILL BE THE NEXT UP FOR RATE CUTS?!?!- Well on Thur. May 9th, BOE meets to take vote on whether they INCREASE, DECREASE or HOLD RATES Also GDP Fri. May 10th .. From a Technical standpoint, I want to watch for Price to either: Find Solid Support at the Minor Level + Ranged Highs to continue higher -OR- Price to drop back down through the High/Low Range with a Bearish Break using Resistance from the Ranged Lows -DOES THE BOE HAVE THE DATA INFRONT OF THEM TO LOWER OR HOLD RATES??-
by Novi_Fibonacci
Coming up: BOE's rate decision week Coming up: BOE's rate decision week Morgan Stanley has asserted that the Bank of England might still opt for an interest rate cut in the coming week, a stance that stands out amidst dwindling market confidence in such a move. Morgan Stanley’s opinion diverges notably from the consensus, which suggests an initial rate cut by the BOE in September. Backing Morgan Stanley's perspective is the decline in U.K. inflation to 3.2% in March from the previous month's 3.4%, although it fell short of analysts' projections of 3.1%. Jens Eisenschmidt, Morgan Stanley’s chief economist, is adamant that rate reductions are on the horizon for both the U.K. and the ECB, while the Fed might adopt a more cautious approach for now. Meanwhile, the European Central Bank, which hinted at an impending rate adjustment last week, has cited escalating tensions in the Middle East as potential obstacles to these plans. Perhaps these same concerns weigh on the BOE? Technically, buyers of GBP/USD struggled to maintain levels above the resistance at the 200-day moving average, approximately at 1.2550. This scenario could potentially lead to a test of the recent cycle low observed at 1.2299. Conversely, if buyers manage to reclaim the 1.2500 level, they may challenge the 50-day moving average at 1.2612, followed by the April high at 1.2708.
by BlackBull_Markets
GBP/USD eyes retail salesThe British pound is having a quiet week and that trend has continued on Thursday . In the North American session, GBP/USD is trading at 1.2450, down 0.04%. The UK release retail sales for March on Friday. The market forecast for March is 0.7% y/y after a decline of 0.4% y/y in February. Today’s British Retail Consortium retail sales index jumped 3.5% y/y in March, raising hopes that the official retail sales release will also improve. The driver behind the strong gain was spending on food, as the Easter holidays fell in late March. Retail sales have shown sharp swings in 2024, with adverse weather keeping shoppers at home and weighing on consumer spending. The weather will improve in the coming months and the Paris Olympics and Taylor Swift concerts are expected to lead to an increase in consumer spending and demand. Inflation in the UK declined to 3.2% y/y in March, down from 3.4% in February but higher than the market estimate of 3.1%. The inflation rate fell to its lowest since September 2021 but the BoE remains cautious and is yet to signal that rate cuts are coming, especially as core inflation has proven to be sticky and is more than double the 2% target. In the US, the Federal Reserve is none too happy about inflation accelerating in February and March. Fed Chair Powell said this week that higher-than-expected inflation would delay rate cuts and there are doubts whether the Fed will raise rates at all this year. The markets have slashed expectations for rate cuts due to the robust US economy and rising inflation. GBP/USD tested support at 1.2451 earlier. Below, there is support at 1.2421 There is resistance at 1.2486 and 1.2516
by OANDA
Pound stabilizes as shop inflation dropsThe British pound is steady on Tuesday after starting the week with losses. In the European session, GBP/USD is trading at 1.2563, up 0.09%. On Monday, the pound fell 0.57% and dropped as low as 1.2539, its lowest level since February 14. Inflation in UK stores fell to 1.3% y/y in March, according the British Retail Consortium (BRC). This was below the 2.5% rise in February and the market estimate of 2.2% and was the lowest level since December 2021. The BRC also reported that food price inflation fell to 3.7% y/y in March, its lowest level since April 2022. This was the 10th straight month that food prices inflation has decelerated. The data points to headline inflation continuing to fall and has raised expectations for a rate cut from the Bank of England. The markets have priced in a quarter-point cut in June at 62%, with an outside chance of an initial quarter-point cut in May. The BoE has stuck to its script of “higher for longer”, maintaining rates at 5.25% for five straight times, but the March meeting signaled a possible shift in policy. Governor Bailey said at the March meeting that the UK was “on the way” to winning the battle against inflation but signaled that rate cuts could be on the way. As well, eight MPC members voted to pause and one voted to lower rates at the March meeting, while at the previous meeting, two members voted in favor of a rate hike. The UK releases the March inflation report on April 16th and this release will likely have a significant impact on the BoE’s rate path. GBP/USD Technical GBP/USD is testing support at 1.2605. Below, there is support at 1.2552 There is resistance at 1.2704 and 1.2757
by OANDA
Pound drops to 1-month low after flat retail salesThe British pound has extended its losses on Friday. In the European session, GBP/USD is trading at 1.2600, down 0.45%. Earlier, the pound fell as low as 1.2584, its lowest level since March 20. UK retail sales were flat in February, after a revised 3.6% gain (m/m) in January. This was better than the market estimate of -0.3%. On an annualized basis, retail sales fell by 0.4%, erasing most of the 0.5% gain in January. Britain’s weather was unusually wet in February which dampened retail trade. The Bank of England maintained the cash rate at 5.25% at Wednesday’s meeting. The pause was widely expected and marked the sixth straight time that the BoE has kept rates unchanged. Perhaps the most significant development at the meeting was the Monetary Policy Committee vote. The MPC voted 8-1 to keep rates unchanged, with one member voting for a quarter-point cut. This was the first time in the current tightening cycle that no members voted for a hike - at the previous meeting, two members voted to raise rates by a quarter-point. The markets pounced on the vote as evidence of a dovish shift in the Bank’s stance and the British pound sank 1% on Wednesday, its worst one-day performance since October 2023. It looks like rates have peaked, but when can we expect the BoE to start cutting rates? Governor Bailey said after the meeting that inflation is not “yet at the point where we can cut interest rates, but things are moving in the right direction”. The markets are looking at an initial cut in June, with an outside possibility in May. GBP/USD is testing support at 1.2605. Below, there is support at 1.2552 There is resistance at 1.2704 and 1.2757
by OANDA
Analysis of RBA, BOJ, FOMC, SNB, BOE and the week aheadWeek of the 18th March (H4) DXY: Stay below 50% (103.70) to maintain bearish view, could trade down to 102.40 support NZDUSD: Buy 0.61 SL 30 TP 100 AUDUSD: Buy 0.6580 SL 40 TP 80 (Tuesday: RBA Decision) USDJPY: Riskier: Sell 148.50 SL 80 TP 200 (Tuesday: BOJ Policy Decision) GBPUSD: Buy 1.2760 SL 50 TP 100 (Thursday:BOE Voting) EURUSD: Sell 1.0860 SL 30 TP 60 (If DXY strengthens) USDCHF: Sell 0.8860 SL 35 TP 105 (Thursday: SNB decision) USDCAD: Buy 1.3455 SL 30 TP 13 (Tuesday: CPI data) Gold: Bounce off 2150 to retest high of 2200
TVC:DXYShort
by JinDao_Tai
GBP/USD edges lower, UK employment nextThe British pound has started the trading week in negative territory. In the North American session, GBP/USD is trading at 1.2807, down 0.39%. The pound has posted six straight winning days and climbed 1.56% last week against the US dollar. The UK releases the employment report on Tuesday. The labor market has remained resilient even with the steep rise in interest rates, and the new measure for employment data has indicated that the labour market is stronger than previously thought. For instance, the unemployment rate in the fourth quarter of 2023 stood at 3.8%, compared to 4.2% under the old measure. The unemployment rate is expected to remain steady at 3.8% in the first quarter. We could see a large drop in job growth, with an estimate of 10,000 for Q4, compared to 72,000 in Q3. Wage growth has been dropping steadily and is expected to tick lower to 5.7% y/y including bonuses, down from 5.8% in the third quarter. The Bank of England will be keeping a close eye on the employment release. The BoE meets on March 21 and Governor Bailey has eased up on his pushback against rate cut expectations. If Tuesday’s employment numbers are stronger than expected, it will likely raise the odds of a rate cut later this year. In the US, Friday’s employment release was a mix. Job growth remained strong as nonfarm payrolls rose 275,000, easily beating the market estimate of 200,000 and the downwardly revised 229,000 in January. However, the unemployment rate surprised by climbing to 3.9% after holding at 3.7% for three consecutive months, which was also the market estimate. This was the highest unemployment rate in two years and points to softer labor market conditions. The rise in the unemployment rate has raised the odds of a rate cut in June by the Federal Reserve. Currently, the likelihood of a cut is 71%, compared to 64% just one week ago, according to the CME’s FedWatch tool. There is resistance at 1.2902 and 1.2945 GBP/USD pushed below support at 1.2852 and is testing support at 1.2809
by OANDA
GBPUSD: Expecting a drop from hereEven though sterling has found recent resilience, we are in a long-term down trend. I believe the recent rally must end, fundamentally the pound is much weaker than the dollar, the UK is in recession and the US looks likely to avoid one. The FED will start cutting rates, but I believe the BoE will act sooner (or at the same time) because it doesn't have the grace of a strong economy. On the LTF's we're at the top of this current dynamic rising range, but I think we may see a break of the lower boundary, and if we do this will be the resumption of the downtrend.
Short
by Finchcliffe
GBPUSD 25/2/24GU following on from our last hourly and higher timeframe post, we have moved like clockwork as we have expected, running back to our higher zones and forming clear liquid under our retracement lows. Now as we stand from last week we are in a bearish swing range as we took the SWL highlighted in our chart here! Looking for a pullback within our five min range and then a shift down into our lows to lower prices where we look for buyers stepping into the game. if we do go higher first il look for a sell off from our supply or a sweep of our SWH leaving us with an A model for sells!
by PipSurfingSociety
GBP/USD climbs after Bailey’s dovish commentsThe British pound is higher on Tuesday. In the North American session, GBP/USD is trading at 1.2650, up 0.43%. With little else on the calendar today, Bank of England Governor Andrew Bailey is front and center. Bailey testified earlier before Parliament’s Treasury Committee and was surprisingly open about possible rate cuts later this year. Bailey did not push back against market expectations and said that the BoE could cut rates even if inflation remained about the 2% target. Up to this point, Bailey has pushed back against market expectations of a rate cut and today’s comments could signal a major pivot in the Bank’s rate policy. Bailey said that the market curve, which is projecting rate cuts, was “not unreasonable”. The BoE has kept rates unchanged since August and there is pressure on the central bank to provide some relief to households and businesses and lower rates. Bailey’s dovish comments to lawmakers could be an attempt to put a positive spin on the weak UK economy, especially after last week's GDP report indicated that the UK economy tipped into a recession in the second half of 2023. Bailey told lawmakers that the data indicated that this was a “very weak recession” and that here were “distinct signs of an upturn”. Still, Bailey’s acknowledgment that rate cuts may be coming is a significant pivot and market pricing on interest rate cuts was brought forward after Bailey’s testimony. Currently, the markets are predicting a first rate cut in August, with two more cuts before the end of the year. GBP/USD tested resistance at 1.2607 earlier. Above, there is resistance at 1.2679 1.2607 and 1.2530 are providing support
by OANDA
GBPJPY 18/02/24GJ giving some nice areas for potential moves, mainly i can see we are using the short term lows as a clear area to build up liquid for a deeper retracement, if this move does take place it will shift us back into a bearish swing range as the 5min price action is currently sitting within a bullish range, this range isn't the strongest but is still valid in terms of a short term bias within price. If we do shift bearish il be looking towards the major demand sitting at our last internal low in price, this of course will also act as liq so running this a possibility. always keep in mind higher timeframe bias is only validated with lower timeframe confirms and trade entries, so be sure to always trade with order flow.
by PipSurfingSociety
GBPUSD: Analysis Pre BOE Rate decision. Today's focus: GBPUSD Pattern – Consolidation Watch Support – 1.2665, 1.2610 Resistance – 1.2751 Hi, and thanks for checking out today's video update. We are looking at the GBPUSD today as the price continues to consolidate in a rough ending diagonal pattern. We have also chosen the cable as we have the UK rates decision to come out later today. Depending on what we see from the BOE, this could be a catalyst to break the price out of its current deadlock. Yes, we do have a consolidation in an uptrend but its not a traditional continuation pattern so we are waiting to see if, and where price breaks ou before we start thinking about directional calls. Rates are expected to remain on hold, so we will be looking for policy clues in the statement. Will we see a breakout today? We have run over scenarios for price and points we will look at for potential confirmation. UK Interest Rate decision is due today at 11:00 pm. Good trading.
by Eightcap
1
GBP/USD dips as retail sales slideThe British pound has weakened slightly on Friday. In the European session, GBP/USD is trading at 1.2682, down 0.18%. The markets were expecting a letdown from December retail sales after a strong November reading, but nobody was expecting a multi-year drop. Yet that's what happened, as retail sales plunged 3.2% m/m, the lowest level since January 2021. Considering the sharp drop, the British pound's reaction has been muted. In November, retail sales jumped a revised 1.4%, as shoppers flocked to department stores to take advantage of Black Friday sales and other discounts. This meant that much of the Christmas shopping took place in November. The massive drop of 3.2% crushed the consensus estimate of -0.5%. There is more to this story than Black Friday sales. The weak December reading reflected a UK consumer who is pessimistic about the economy and is being relentlessly squeezed by high inflation and elevated borrowing costs. December retail sales were brutal but the struggles faced by consumers are nothing new - retail sales fell by 2.8% in 2023, the lowest level since 2018. The sharp drop in retail sales will have a negative impact on December GDP, which could mean that GDP for the fourth quarter is negative. If that is the case, the UK will technically be in a recession, with two consecutive quarters of negative growth. Even if the UK manages to avoid a recession, growth will be flat. The Bank of England has kept rates unchanged for three straight times and meets on February 1. The sharp drop in retail sales supports the BoE considering a rate cut, but December inflation rose unexpectedly from 3.9% to 4.0%, and the BoE will be hesitant to chop rates before inflation is closer to the 2% target. GBP/USD is testing support at 1.2689. Next, there is support at 1.2625 There is resistance at 1.2738 and 1.2802
by OANDA
GBP/USD eyes UK retail salesThe British pound has edged lower on Thursday. In the European session, GBP/USD is trading at 1.2655, down 0.20%. What goes up must come down. That has the markets fretting ahead of the UK retail sales report on Friday. Retail sales growth was brisk in November, with an impressive gain of 1.3% m/m. This followed zero growth in October and marked the strongest gain since April 2022. The problem with the strong November release was that consumers were enticed to spend big due to Black Friday sales in late November. This is expected to dampen December retail sales, with many shoppers taking advantage of the discounted prices and attending to their Christmas shopping a few weeks early. The market estimate for December retail sales stands at -0.5%. The Bank of England will be keeping a close look at the retail sales report, as it digests this week's inflation data with an eye to the next policy meeting on February 1. Inflation in December rose unexpectedly, climbing from 3.9% to 4.0%. The BoE has tried to dampen market expectations of up to six rate cuts this year, with Governor Bailey sticking to a script of "higher for longer". The BoE won't be entertaining rate cuts until it is convinced that inflation is closer to the 2% target and key economic releases point to an improving economy. The unexpected rise in inflation did not support talk of a rate cut, and all eyes are now on Friday's retail sales report. GBP/USD tested support at 1.2656 earlier. Next, there is support at 1.2616 There is resistance at 1.2715 and 1.2755
by OANDA
GBP/USD eyes UK wage growthThe British pound has started the week with slight losses. In the European session, GBP/USD is trading at 1.2725, down 0.21%. The UK will release employment data on Tuesday and the spotlight will be on wage growth. Over the past few months, wages have been falling and the Bank of England would like to see that trend continue as wages have been driving inflation. Average earnings including bonuses dropped to 7.2% in the three months to September, down from 7.7% in the previous release. The market estimate stands at 6.8% for the three months to October. The UK economy is in trouble, although there was some good news on Friday, as November GDP rebounded with a gain of 0.3% m/m after a 0.3% decline in October. Retail sales drove the gain as shoppers took advantage of Black Friday sales late in November. Still, the probability of a recession, which is defined as two consecutive quarters of negative growth, remains high. The economy declined by 0.1% in the third quarter and a fourth quarter of negative growth would mean that the economy is technically in a recession. Even if a recession is avoided, the economy has flatlined and isn't showing any growth. The lack of economic growth puts the Bank of England in a dilemma. The central bank has sharply raised interest rates in order to curb high inflation and significant progress has been made. A year ago, inflation was in double digits, galloping at a 10.1% clip. Inflation has fallen to 3.9%, which is still double the 2% target. Governor Bailey has pushed back against rate cuts and insisted that the BoE would maintain a 'higher for lower' rate path, but lowering rates would increase economic activity and lessen the likelihood of a recession. The BoE has maintained the cash rate at 5.25% three straight times and meets next on February 1. GBP/USD is testing support at 1.2721. Below, there is support at 1.2687 There is resistance at 1.2753 and 1.2787
by OANDA
GBP/USD yawns after strong UK GDPThe British pound is showing limited movement on Friday. In the European session, GBP/USD is trading at 1.2769, up 0.05%. The British economy grew in November by 0.3% m/m, rebounding from a 0.3% decline in October and edging above the market estimate of 0.2%. This was the sharpest GDP growth since July and was driven by stronger activity in services, retail sales and manufacturing. The news was not as good from a three-month snapshot, however. The economy contracted 0.2% in the three months to November, unchanged from the previous release and missing the market estimate of -0.1%. The December GDP release will answer the question of whether the UK economy is in a shallow recession. Third quarter GDP was revised to -0.1% and if Q4 also posts negative growth, the economy would technically be in a recession. Even if the economy manages to avoid a recession, it will likely point to stagnation. The weak UK economy presents the Bank of England with a dilemma. The BoE is under pressure to lower rates to kick-start the economy, but inflation is running at a 3.9% which is almost double the 2% target. The BoE would prefer to maintain a 'higher for longer" rate path and let restrictive rates continue to push inflation lower. The central bank is likely to keep interest rates on hold at the next meeting on February 1. In the US, inflation was higher than expected in December, with a gain of 3.4%. This was a rude surprise for the markets, which have become accustomed to inflation heading lower. The Fed won't be losing sleep over the upswing, as Core CPI, which is a better indicator of inflation trends, dipped lower to 3.9%. The rise in US inflation is a reminder that the battle to bring inflation back to the 2% target will be bumpy. The Fed has done an admirable job in lowering inflation but the final stretch is looking to be the most difficult. Services and housing inflation remains sticky and deflationary pressures from goods and energy have been fading. The markets have pared their expectations for a March rate cut to around 70% but the Fed has been pushing back against these expectations. Cleveland Fed President Mester said on Thursday after the inflation report that it was "too early" to cut rates in March because the inflation release showed that restrictive policy was needed to bring down inflation to the 2% target. GBP/USD is putting pressure on resistance at 1.2795. Above, there is resistance at 1.2826 There is support at 1.2742 and 1.2711
by OANDA