GBP/USD Consolidates Near 14-Month Highs as Traders Await Further Direction

Despite a mixed set of UK economic data earlier in the week, which included disappointing figures for Gross Domestic Product (GDP), Industrial Production, Manufacturing Production, and the Index of Services, the GBP/USD bulls remained undeterred due to ongoing hawkish BoE sentiments, particularly regarding inflation.

The US Dollar Index (DXY) is showing some recovery, aiming to reduce its largest daily loss in three months around 102.30. This development has also provided support to buyers of the Pound Sterling. However, the GBP/USD pair faced significant downward pressure on the previous day due to mixed US data and market uncertainty about the possibility of a July rate hike by the Federal Reserve, despite the central bank’s comments on Wednesday.

On Thursday, US Retail Sales for May showed growth of 0.3%, beating expectations of -0.1% and the previous reading of 0.4%. Core readings, which exclude automobile sales, met market forecasts of 0.1% for the same month, compared to the previous reading of 0.4%. Additionally, the NY Fed Empire State Manufacturing Index for June surged to 6.6, surpassing expectations of -15.1 and the previous reading of -31.8. On the other hand, the Philadelphia Fed Manufacturing Index dropped to -13.7 for the same month, down from the previous reading of -10.4 and below market forecasts of -14. Furthermore, US Industrial Production for May contracted by -0.2%, missing estimates of 0.1% and the previous reading of 0.5%. Initial Jobless Claims also exceeded expectations, reporting figures of 262K for the week ending on June 09, compared to the anticipated 249K.

Given the current landscape, market participants appear more optimistic about the BoE’s stance compared to the Federal Reserve, which has kept the GBP/USD pair on the bull’s radar despite the recent pullback in prices.

Looking ahead, the release of UK’s Consumer Inflation Expectations for June will precede the preliminary readings of the Michigan Consumer Sentiment Index (CSI) and five-year inflation expectations for the same month, which are expected to provide further guidance for GBP/USD movements throughout the day.