Sterling Slump Continues after Disappointing UK Retail Sales

GBP/USD News and Analysis

• UK retail sales disappoint – sending GBP/USD lower in early trade on Friday
• GBP/USD bearish momentum likely to continue into the weekend
• UK PMI data up next, potentially adding to the sterling selloff
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

UK Retail Sales Disappoint in August

UK retail sales largely failed to improve on July’s rain affected print as rising oil prices and weaker online contributed to the less than stellar results. Going forward, the average British household will be breathing a slight sigh of relief after the Bank of England (BoE) decided to halt hiking interest rates this week owing somewhat to the recent progress on inflation. However, elevated oil prices are likely to keep a lid on consumer spending heading into the fourth quarter and the festive Christmas season.

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GBP/USD Bearish Momentum Likely to Continue into the Weekend

The impressive selloff which began in the middle of July, has stepped up a gear after the Bank of England (BoE) signaled a possible end to the hiking cycle after promising to keep interest rates at “sufficiently restrictive” levels for “sufficiently long” to get inflation back to the target. With markets pricing in only a slight chance of another BoE hike by the end of the year, sterling has had the rug pulled out from underneath it.

Hurtling through 1.2345 with ease, GBP/USD now looks to 1.2200 as the next level of support but the RSI has entered oversold territory – meaning it would not be unusual to see a slight reprieve as early as next week perhaps. That being said, the pair’s long-term trend remains well intact with few other signs of a slowdown. Resistance remains at 1.2345.

GBP/USD Daily Chart

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX