GBP/USD: Sterling volatile after data, BoE Decision
|The British pound was volatile today and the earlier rally was sold-off as the GBPUSD pair was trading 0.3% weaker during the US session, changing hands at around 1.3040, which are two-week lows for this pair.
British retail sales slowed sharply in November and printed 1.% year-on-year, well down from 3.1% in October and also well below the 2.1% expected by analysts. The monthly change dropped from 0.0% to 0.5%.
Moreover, the core retail sales indicator crashed to 0.8% on a yearly basis, down from 2.7% previously, while the month-on-month change declined further to -0.6% from -0.1% booked in October. Sterling failed to move after these disappointing numbers as investors were waiting for the Bank of England's monetary policy decision.
The bank's Monetary Policy Committee voted 7-2 (as expected) in favor of maintaining rates at 0.75%, with doves Jonathan Haskel and Michael Saunders voted in favor of a 25bps cut, saying that with little room for looser policy, "risk management considerations favored a prompt response to downside risks." Sterling fell after this news.
However, it rose sharply following another hint from the BoE that rate hikes may not be too far off, as the BOE said that should the economy perform broadly in-line with the MPC's latest projections, "some modest tightening of policy, at a gradual pace and to a limited extent, may be needed to maintain inflation sustainably at the target."
Nevertheless, the pound failed to hold gains and declined to daily lows during the US session.
If the pair breaks below the 1.30 threshold, further drop toward 1.2950 could occur. Alternatively, the resistance is spotted near 1.31 and as long as sterling remains below it, the short-term outlook seems bearish. Breaking above this level would cancel the bearish trend and the pair might then rally toward 1.3180.
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