- GBP/USD slips to 1.2650 as Sterling falters.
- UK Retail Sales and PMIs will end the trading week on a high note.
- US PMI figures are set to contribute to the week’s data releases, with expectations of a potential softening.
There will be a very fruitful session on Friday for GBP/USD. During the European market session, the UK is expected to disclose important data, and the US Purchasing Managers Index (PMI) activity surveys will round out the trading week. Retaining interest rates at 5.25% was the decision this week by the Bank of England (BoE). Expectations for a more widespread interest rate cut were dashed by their steadfast stance on the matter.
In June, most people expected the Bank of England to keep interest rates unchanged. The value of the pound was unknown because of the focus on the recent increase in service prices and the overarching goal of keeping inflation consistently low. Furthermore, the Bank of England has made it clear that it will stick to its tight policies for the foreseeable future. Furthermore, they have brought attention to the fact that the UK labor market is still somewhat tight in comparison to its historical levels, despite the fact that it is more flexible than before.
The release of US economic data had a dampening effect on investor risk appetite on Thursday. Of particular concern was the disappointing US Initial Jobless Claims figure for the week ending June 14, which came in higher than anticipated. Unemployment claimants for the week decreased to 238K, down from the revised previous figure of 243K. However, this number is slightly higher than the four-week trending average of 242.75K, which also increased from the previous figure of 227.25K.
Following the decision of the BoE to maintain interest rates at 5.25%, GBP traders will now shift their attention to the upcoming economic data scheduled for Friday. Upcoming releases consist of UK Retail Sales and revised S&P Global PMI data for both the UK and the US. It is anticipated that retail sales in the UK will experience a recovery of 1.5% on a month-on-month basis in May, following the previous decrease of -2.3%. In addition, it is expected that the UK PMIs will indicate some small improvements. It is predicted that the Manufacturing PMI will go up to 51.3 from 51.2, while the Services component is expected to increase to 53.0 from 52.9.
The US Manufacturing and Services PMIs are predicted to slightly decrease, with Manufacturing projected to decline to 51.0 from 51.3 and Services expected to slide to 53.7 from 54.8.
Technical Analysis of GBP/USD
The Pound Sterling experienced a decrease in value, falling below the 1.2700 level against the US Dollar on Thursday. This decline brings it closer to the recent lows at 1.2657. Based on technical indicators, there are signs that the bearish trend may continue since the price was unable to remain above the 200-hour Exponential Moving Average (EMA) at 1.2721. If there is no substantial upward movement to counteract this trend, it is probable that there will be additional declines in value.
The daily candlestick chart suggests a bearish rejection from a supply zone above the 1.2800 level, hinting at a possible retreat towards the 200-day EMA, which is presently situated around 1.2580. The support offered by the 50-day EMA at 1.2674 is gradually losing strength, and if the bearish momentum persists, GBP/USD might decline towards the lowest levels seen in 2024, approximately around the 1.2300 mark.