- UK retail sales fell 0.7% in October, compared with estimates for a 0.3% drop.
- The UK economy grew by just 0.1% in the third quarter.
- Initial jobless claims in the US unexpectedly fell last week from 219,000 to 213,000.
GBP/USD price analysis shows weaker consumer spending in the UK, pushing the pound to a six-month low. On the other hand, the US labor market remains resilient, dampening Fed rate cut expectations.
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Data on Friday showed UK retail sales fell 0.7 per cent in October, compared with estimates for a 0.3 per cent fall. Falling sales are a clear indication that consumer spending is weak. This follows other economic reports showing a slowdown in the UK economy. Namely, GDP data showed that the economy grew by only 0.1% in the third quarter.
Adding fuel to the fire, the UK services and manufacturing PMI reading missed estimates. Negative numbers could keep the pound under sustained pressure throughout the current trading session.
If this trend continues, the Bank of England may be forced to change the timing of interest rate cuts. Experts initially believed that the new government budget would improve economic performance. However, so far economic data has shown the opposite.
On the other hand, the US economy has remained resilient despite high interest rates, making policy makers cautious. Data on Thursday showed that initial jobless claims unexpectedly fell last week from 219,000 to 213,000. Meanwhile, economists had expected 220,000 claims.
Labor market resilience has prevented the Fed from rushing to lower borrowing costs. At the same time, Trump’s recent victory has changed the outlook for economic growth and inflation. His policy changes could boost growth and lead to a spike in inflation. High inflation will force the Fed to keep interest rates tight, which is bullish for the dollar.
GBP/USD key events today
- US manufacturing PMI
- US flash services PMI
GBP/USD Price Technical Analysis: Bears trigger drop to 1.2500 support
From the technical side, GBP/USD the price broke below the support level of 1.2600 to make a new low near the key psychological level of 1.2500. The new low indicates a continuation of the downtrend after a retest of the 30-SMA resistance.
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However, the RSI made a slight bullish divergence. While the price made a lower low, the indicator made a higher one. This is a sign that the bearish momentum is fading and could lead to a reversal. However, if the price remains below the 30-SMA, the bears could eventually break the 1.2500 support level.
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