- The UK economy shrank unexpectedly in October.
- The pound has lost nearly 2% against the dollar this week.
- Market participants await the US retail sales report.
GBP/USD price analysis shows an unexpected contraction in the UK economy, which has put the pound in a vulnerable position. On the other hand, the dollar is heading for a weekly gain amid optimism that Trump’s policies will boost growth. Meanwhile, investors remain cautious ahead of the US retail sales report.
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Data on Friday revealed that the UK economy unexpectedly shrank in October. GDP was -0.1%, compared to estimates of growth of 0.2%. This was a disappointment for the new government, which is focused on increasing economic growth. At the same time, he increased pressure on the Bank of England to continue reducing borrowing costs.
The pound had a tough week that ended with bad data. It lost almost 2% of its value against the dollar.
Meanwhile, analysts predict strong growth and high inflation in the US under the Trump administration. Consequently, the dollar rose to a one-year high against most of its peers. Wednesday’s inflation data failed to grab traders’ attention as it was in line with expectations.
However, Powell’s speech on Thursday further boosted the dollar. The Fed chairman said there was no rush to cut borrowing costs because the economy remained strong. His remarks sent bets on a Fed rate cut falling sharply, with markets now pricing in a 48.3 percent rate cut in December.
Market participants await the US retail sales report for more clues on Fed policy. The higher-than-expected reading will further dampen bets for a December rate cut. On the other hand, a bad report will affect the dollar.
GBP/USD key events today
- US Core Retail m/m
- USA retail m/m
GBP/USD Price Technical Analysis: The downtrend is pausing, but it is around 1.2600
From the technical side, GBP/USD the price paused the decline at the support level of 1.2650. The price is trading well below the 30-SMA and the RSI is still near the oversold region. Therefore, the pair has a strong bearish bias.
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A pullback would retest the 1.2750 or 30-SMA resistance level before the bears regain control. Meanwhile, a strong catalyst could allow the downtrend to continue above the key psychological level of 1.2600.
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