British Pound advances as weak US sales deepen USD slide
- GBP/USD edges up as weak US Retail Sales pressure Dollar.
- Consumer sentiment drops, reinforcing Fed hold bets for September.
- UK GDP strength shifts focus to inflation and jobs data.
The Pound Sterling rises by some 0.40% on Friday as a batch of US data justifies the Fed's dovish approach, with consumer sentiment deteriorating while the disinflation process improved. The GBP/USD trades at 1.3545 after bouncing off daily lows of 1.3482.
GBP/USD climbs as soft US spending and sentiment boost Fed hold bets
In the week, GBP/USD is poised to finish the week in the green. The US Dollar Index (DXY), which measures the buck’s performance against six currencies, is down 0.40% to 99.54, set to end near weekly lows as traders priced out Fed interest rate hikes.
US July Retail Sales snapped nine months of straight gains, declining 0.6%, below forecasts for a 0.1% increase. Sales in the control group, used in the calculation of the Gross Domestic Product (GDP), dropped as well by -0.4%, after registering a 0.4% growth in June, according to the US Commerce Department.
The University of Michigan Consumer Sentiment, in its preliminary August reading, deteriorated as households remained concerned about elevated prices. The index fell from 55.2 in July to 51.0, snapping two straight months of improvement. Inflation expectations for the next 12 months rose from 4.2% to 4.3%, while expectations for 5 years remained unchanged at 3.3%.
After the data, money markets expect the Fed to hold rates unchanged, with odds at 70% and the chance of a rate hike at 30%, as depicted by Prime Terminal.
In the UK, the weekly economic schedule was anaemic, except for the release of Gross Domestic Product (GDP) figures, which showed that the economy expanded at a 0.3% pace in June, the strongest among G7 developed countries.
Next week, the UK schedule will feature inflation and employment data, as well as Retail Sales. In the US, housing data, the ADP Employment Change 4-week average, jobless claims and Flash PMIs.
GBP/USD Price Forecast: Technical Outlook
In the daily chart, GBP/USD trades at 1.3549, extending its recovery above the key simple moving averages cluster around 1.3374 and former trend-line caps at 1.3423 and 1.3508, which now underpin the bullish near-term bias. The pair holds comfortably over these reclaimed supports while the Relative Strength Index (14) at 63.9 leans toward overbought territory, suggesting upward momentum remains constructive but increasingly stretched.
On the downside, immediate support is located at the recent breakout area near 1.3508, followed by the former downward resistance trend-line level at 1.3423 and the triple simple moving average region around 1.3374, with an additional structural floor at 1.3342 reinforcing the broader base. On the topside, the rising support trend line turned barrier at 1.3590 marks the next resistance to beat; a sustained move above this level would open the door to further gains, while failure to clear it may trigger a corrective pullback toward the 1.3508 zone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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