- GBP/USD recovers intraday lows as it snaps three-day uptrend after key UK data.
- UK retail sales fell to -1.0% month-on-month in December, compared to expectations of 0.5% and -0.4% earlier.
- Hawkish Fedspeak allows the US dollar to pare recent losses despite unfavorable US data.
- Positive comments from BOE’s Bailey, JP Morgan’s upbeat outlook for the UK economy put a floor under the price of cable.
GBP/USD is taking bids to recover from intraday lows near 1.2350 as UK retail sales disappointed on Friday. However, it is worth noting that recently hawkish comments from Bank of England Governor (BoE) Andrew Bailey and optimistic forecasts of JP Morgan seem to have laid Cable few.
UK retail sales for December fell 1.0% month-on-month, compared to market expectations in favor of 0.5% growth and -0.4% from previous data. With UK retail sales taking the lion’s share of UK gross domestic product (GDP), GBP/USD is falling after key data.
Bank of England (BoE) Governor Andrew Bailey commented on Thursday: “The fall in inflation in December is an early sign that the corner has been turned. The politician also adds that he thinks there will be a recession, while also saying that the recession will be shallow by historical standards.
Elsewhere, JP Morgan came up with a positive view for the UK interest rate for Q2 2023 at 4.5% versus 4.25% previously estimated. Likewise, the investment bank estimates that UK GDP growth will improve to -0.1% in fiscal year 2023 (FY2023), up from -0.3% in previous forecasts.
It should be noted that talks of a UK fuel tax cut and the expectation that there will be no further tax breaks for Britain’s wealthy in the next budget appear to be a probe for GBP/USD traders.
On another page, US dollar index (DXY) is consolidating the previous day’s losses, the biggest in more than a week, as Fed policymakers favor higher rates in their final public appearances ahead of a 15-day quiet period before the Federal Open Market Committee’s (FOMC) meeting in February. Still, mixed US data probes GBP/USD bears. That means US jobless claims fell to their lowest level since late April 2022 and Philadelphia. Fed The manufacturing survey index also improved. However, US Building and Housing Starts joins the previously released top US retail sales and Producer Price Index (PPI) to stoke fears of a recession in the world’s largest economy, previously supported by softer wage growth and activity data from the US.
Among these plays, key US Treasury yields are looking to extend the previous day’s bounce from multi-day lows, while S&P 500 Futures are posting modest gains. Been said, supplies in the Asia-Pacific region, trade is mixed.
As a result, the GBP/USD pair is likely to remain on the sidelines, although the bears have started to see some welcome notes recently.
GBP/USD is retreating from the May 2022 descending resistance line, around 1.2400 as of press time. Even so, the pair’s successful trading of the two-week old ascending support line, most recently near 1.2315, keeps buyers hopeful.