Home Forex GBP/USD falls as UK retail sales fall sharply, fueling recession fears

GBP/USD falls as UK retail sales fall sharply, fueling recession fears

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  • Retail sales fall: Sterling falls against the US dollar as UK retail sales are down a staggering -3.2% month-on-month.
  • BoE policy concerns: Dismal retail data raises doubts about Bank of England policy tightening amid recession fears.
  • US data mixed: GBP/USD affected by contrasting US data, with improved consumer sentiment but weaker home sales.

The pound sterling (GBP) fell American dollar (USD) after the Office for National Statistics (ONS) revealed that retail sales fell sharply, which could discourage the Bank of England (BoE) from keeping policy tight without the economy going into recession. Mixed data from the United States (US) sponsored a decline in the main such as GBP/USD exchanged hands at 1.2687 after reaching a daily high of 1.2714.

Sterling faces headwinds as poor retail data raises concerns, while mixed US indicators add to market volatility

In addition, Chicago Federal Reserve (Fed) President Austan Goolsbee said they (the Fed) need more data before they start releasing Monetary Policy establish an appropriate level of restriction. On the data side, consumer sentiment in the US improved sharply, according to a University of Michigan (UoM) survey, while inflation expectations were cut to one- and five-year horizons.

Consumer sentiment rose to 78.8, beating both forecasts and the previous month’s increase of 69.7. In addition, Americans expect inflation to fall as expectations for one year fell from 3.1% to 2.9% and for the next five years cooled from 2.9% to 2.8%.

US existing home sales fell to their lowest level in more than 13 years in December. Sales fell -1% month-over-month from 3.82 million to 3.78 million, down from the previous month forecast.

UK retail sales fell by a staggering -3.2% month-on-month after rising 1.4% in November and below forecasts for a 0.5% drop. The release poured cold water on Sterling’s rally, which had benefited from the tepid inflation report, which sources cited by Reuters said “December’s CPI surprise was a blip”.

A day ago, San Francisco Fed President Mary Daly is expected to cross the wires ahead of the blackout period that precedes the first monetary policy meeting in 2024.

GBP/USD Price Analysis: Technical Outlook

Technically, GBP/USD is trading sideways, but has tilted to the downside after peaking around 1.2785 on January 12, but sellers failed to break the 50-day moving average (DMA) at 1.2616. if buyers want the rally to continue, they need to drag prices above 1.2700, followed by 1.2785, before 1.2800. Conversely, if sellers reach a daily close below the January 18 open of 1.2676, a “tweezer top” will form, opening the door to further losses. First support is seen at 50-DMA at 1.2616, followed by 1.2600 and 200-DMA at 1.2547.

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