Where we are: GBP/USD is currently trading around 1.3405, pressured after disappointing domestic data. The pair traded in a tight overnight range of 1.3400-1.3430. This is below yesterday’s New York close around 1.3420, suggesting the intraday bias is bearish. Key support lies at 1.3370, with resistance around 1.3450.
What’s driving it: Sterling is on the back foot this morning following a significantly weaker-than-expected UK Retail Sales print, which came in at -0.6% m/m versus a forecast of -0.6%. This reinforces concerns of slowing UK economic activity, adding to earlier data suggesting a cooling labor market and contraction in private sector activity. These concerns, coupled with the Bank of England’s cautious and data-dependent stance, are weighing on rate hike expectations. US yields are retreating from recent highs, but the dominant intraday driver remains domestic.
- UK Retail Sales printed -0.6% m/m, missing expectations and highlighting consumer weakness.
- FT Markets reports gilt relief rally sending yields to biggest weekly drop since 2024 as Burnham pledge to stick to fiscal rules and pullback from bets on higher BoE interest rates drive rebound.
- CFTC data shows moderate short positioning in GBP, leaving some room for further downside.
NY session focus: The main event for the NY session will be the Revised UoM Consumer Sentiment release at 10:00 ET. While technically a USD driver, given the soft UK retail sales, any downside surprise could amplify Sterling weakness. Key levels to watch are 1.3370 on the downside and 1.3450 on the upside. The trade that’s working is fading Cable rallies. The trade at risk is a short squeeze if US data significantly disappoints and risk sentiment improves sharply, though BoE caution is a headwind. The pain trade is a sustained break above 1.3450, fueled by a dovish repricing of the BoE.