The GBP/USD pair was weighed down by dismal UK economic data.
USD/GBP Price Forecast: As GBP bulls failed 1.3200 to recover, the path of least resistance is downward biased.
The British pound recovered from intraday losses during the mid-North American session. However, it did not regain the 1.3200 mark courtesy of Fed hawkishness and risk-on market mood. Bank of England’s rate increase, with one dissenter being perceived as a dovish rise, helped to keep the British pound in check. The GBP/USD trades at 1.3187 as of the writing.
The market sentiment improved late in the North American session. This boosted appetite for risk-sensitive currencies such as the GBP. Despite a greater appetite for the greenback and a slower recovery of the GBP/USD, the UK provided disappointing data.
The UK economic docket reported that the UK’s Retail Sales fell by 0.3% in February. This was lower than the 0.6% expected increase and was below January’s 1.9% reading. Sales excluding petrol dropped 0.7% in February, which was below forecasts of 0.5% increase.
Two commercial banks across the pond expect the US central banking to increase its rate by 50 basis points. Citigroup and Goldman Sachs expressed their belief that the Federal Reserve will hike 50-bps at its May and June meetings. This would raise the Federal Funds Rate (FFR), to 1.50% by end of the first quarter of this year.
These forecasts are based on what Fed Chairman Jerome Powell said during the week. He also expressed openness to raising rates by more than 25 basis points, as he did at Monday’s NABE conference.
In the US economic docket, Pending Home Sales declined 4.1% in February from the expected 1% m/m rise. The University of Michigan Consumer Sentiment Final March was 59.4 compared to 59.7 and inflation expectations remained at 5.4% vs 4.9% in the previous report.
GBP/USD Forecast: Technical outlook
Further selling pressure was created by the GBP/USD’s failure to regain the 1.3200 level for the second consecutive day. The Relative Strength Index (RSI), which is currently at 44, is in bearish territory and aiming down. This signals that the GBP/USD could add to its losses in the next few days as month-end flows toward the greenback may prolong the fall.
However, GBP/USD’s first support would be December 8, 2021. This is a daily low of 1.3160. The 1.3105 mark would be exposed if the former is breached.
