GBP gets a boost momentarily from stronger retail sales print. UK Retail Sales Show the Resiliency of the UK Consumers Yet Again

GBP Key Considerations

GBPUSD Bulls fight at a level of 1.2900.

UK Retail Sales Provides the BoE with Fresh Security that Consumers are capable of handling More rise in rates. Through Illustrating the stamina of the British Consumer.

Near-term variations in the trajectory of both Fed & BoE rate hikes might maintain support for GBP.

Markets had anticipated a tepid gain of 0.2 percent in June’s monthly retail sales. But instead they saw a 0.7 percent increase.

GBP may benefit in short term likely

As market investors situate themselves in front of the upcoming FOMC meeting, GBP saw its decline from Wednesday continue onto Thursday. This was due to a higher dollar. Though encouraging UK sales figures released today. May keep pound heading upwards over the medium period of time. The US dollar is encountering some significant barrier.

The BoE will certainly take note of the pleasant news in UK retail sales today. While it considers raising interest rates at its next session in September. The assumption that UK consumers may tolerate greater prices. While the struggle over inflation persists would be reinforced by a solid retail sales figure. Although there have been encouraging indicators this week about UK inflation. Much work still has yet to be performed. UK Chancellor Hunt stated that should the UK sticks to its objective of halving inflation, they will start to see benefits.

Stronger retail sales might raise their product pricing – Adding fuel to increased interest rates

Source: Monthly Business Survey, Retail Sales Inquiry from the Office for National Statistics

In despite the weight of increasing prices and interest rates set by the BoE. The consumer expenditure in the UK was steady in June. Positive sales growth has tempered the excitement sparked by June’s mild inflation numbers. As stronger consumer spending may enable businesses to hike costs at the factory doors once yet again. The durability of spending by consumers may further increase expectations for a second 50-bps (bp) rate rise from the UK monetary authority.

A subdued tone with a 25bps raise over the following week. Might make the US Dollar more susceptible to additional declines that could help the pound continue to rise.

Technical Perspective and Views

Since resetting its YTD peak of July 13, GBPUSD continues to be gradually declining. The uptick today will be appreciated as sterling attempts to end a five-day declining run. The rising trend line sits under the June 16 swings top. Where pound established support. If there be more declines, this trend line might offer supportive dynamics.

As UK Retail Sales greatly outperform forecasts, sterling recovers to go close to level resistance of 1.2900. The 20-day(EMA) around 1.2860. Where the pound gained support, shows that the near-term bullish tilt is still present. Momentum indicators show that the trend upward has diminished yet remains mostly present.

Major Levels

Support levels:

• 1.2850
• 1.2700
• 1.2658 (50-day MA)

Resistance levels:

• 1.2900
• 1.3000 (psychological level)
• 1.3150 (YTD High)