Pound drifting ahead of UK retail sales

Markets brace for soft retail sales

It continues to be a quiet week for the British pound. That could change on Friday, with the markets bracing for more bad news from retail sales data for May. Headline retail sales is expected at -4.5%, after an April reading of -.4.9%. Core retail sales are expected to decline by 5.1%, following a -6.1% reading in April.

Weak retail sales numbers should not come as a surprise, with UK consumers hammered by surging inflation and grappling with a worsening cost of living crisis. There was no relief (not that any was expected) from yesterday’s inflation report. Headline CPI rose to 9.1% in May, a notch higher than the 9.0% reading in April. Inflation expectations are moving higher, and this week’s major rail strike reflects the deep discontent amongst workers who are watching prices soar. The Bank of England isn’t inspiring much confidence, as its recent 0.25% rate hike was a tepid move. The BoE has projected that inflation won’t peak until it tops 11% later this year, which will be cold comfort for UK households.

In the US, the Federal Reserve is also in a tough fight with high inflation and delivered a massive 0.75% hike last week in order to slow down inflation.  Fed Chair Powell testified before a Senate committee yesterday and will brief a congressional committee later today. Powell was transparent in his remarks, acknowledging that a recession was “certainly a possibility”, adding that a soft landing would be “very challenging”. Powell mentioned the usual suspects beyond the Fed’s control, namely, high commodity prices, supply chain issues and the Ukraine war. The Fed will have to make some tough decisions regarding future rate hikes, such as whether to deliver further 0.75% hikes, which will help curb inflation but could tip the economy into a recession.

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GBP/USD Technical

  • 1.2187 is providing support, followed by 1.1969
  •  There is resistance at 1.2283 and 1.2441

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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