- US retail sales data on Tuesday revealed a smaller-than-expected increase.
- The Fed has forecast just one rate cut this year.
- The pound fell ahead of the Bank of England’s policy meeting.
GBP/USD price analysis pointed south despite a drop in the dollar after retail sales missed forecasts. The pound remained weak as investors prepared for the Bank of England’s policy meeting later in the week.
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US retail sales data on Tuesday revealed a smaller-than-expected increase, showing that consumer spending was not as strong as expected in May. Moreover, the data for April was revised lower, indicating a slowdown in the economy. Retail sales rose 0.1% in May after falling 0.2% in the previous month. This was in line with recent US data which revealed weaker demand in the economy and cooler inflation. All of this points to a higher likelihood that the Fed will implement two rate cuts this year.
However, the Fed only predicted one rate cut this year, leading to some confusion in the markets. If the data continues to show weak economic activity, the Fed could be forced to cut rates earlier than December.
Meanwhile, the pound fell ahead of the Bank of England’s policy meeting, where the central bank is likely to keep rates unchanged. At the same time, policymakers could hint at the possible timing of the first rate cut.
Investors are also preparing for the UK CPI report due on Wednesday, which is likely to steer markets towards the prospect of a contraction in the UK. Economists believe inflation rose 2.0% in May after a 2.3% increase in April.
GBP/USD key events today
Investors will continue to digest the US retail sales report as there are no more key events for the day.
On the technical side, the GBP/USD price broke below the 1.2700 support, retested it and is now moving lower. This is a big move for the bears as the price has been trying and failing to break below this support level for a long time. This break allows the price to move lower and target the support level of 1.2600.
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The price is trading well below the 30-SMA and the RSI is below 50 in bearish territory, supporting the bearish bias. This bias will continue if the price trades below the 30-SMA and the price could continue below the support at 1.2600.
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