GBP/USD Remains Bid Despite Weaker UK Economy
GBP/USD turned quite bearish from July until October, falling from above 1.31 to 1.20 lows. But, it staged a positive reversal in November and has been moving upward ever since, despite the UK economy going from bad to worse. But, the USD weakness is keeping this pair bullish and it is ending the week little changed, after a softer inflation report earlier this week.
According to last week’s inflation report, the headline CPI fell below 4$, and its components, such as food price inflation decreased as well, with the annual average now slipping below double digits to 9.2% in November. The BOE has been attempting to seem hawkish by leaving rate hike options open, so buyers have been in control in GBP/USD .
But, with core prices falling faster than expected, the Bank of England may be pushed to modify its policy sooner rather than later. On the other hand, the FED already signaled a policy shift and the start of rate cuts probably in Q1 of next year, which has been pushing this pair higher and moving averages have been acting as support. Yesterday we saw a bounce off the 20 SMA (gray) on the daily chart, as shown above.
Today we had a round of economic data coming out of the UK, with the final revisions for the Q3 GDP, Revised Business Investment QoQ, and the Retail Sales figures for November.
UK Q3 Final GDP Report and Retail Sales for November
- Q3 final GDP QoQ -0.1% vs 0.0% prelim
- Q2 GDP was +0.2%
The UK economy dropped somewhat in the third quarter, which takes some of the luster off the better retail sales data here. It’s not a major deal, but it confirms that economic conditions remain unstable, especially if this spills over into the labor market.
UK November Retail Sales Released by ONS – 22 December 2023
- November retail sales MoM +1.3% vs +0.4% expected
- Prior sales MoM were -0.3%; revised to 0.0%
- Retail sales YoY +0.1% vs -1.3% expected
- Prior -2.7%; revised to -2.5%
- Retail sales (ex-autos, fuel) +1.3% vs +0.4% m/m expected
- Prior -0.1%; revised to +0.2%
- Retail sales (ex-autos, fuel) +0.3% vs -1.5% y/y expected
- Prior -2.4%; revised to -2.1%
GBP/USD Live Chart
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