GBP/USD: UK political drama offers less action, focus on UK/US retail sales
|- GBP/USD remains on the back foot amid political pessimism in the UK.
- Opposition leader vows no-confidence vote, Brexit delay, re-election.
- All eyes on the July month Retail Sales from the US and the UK.
Despite much action in risk sentiment, the GBP/USD pair keeps the modestly unchanged status as it trades near 1.2060 heading into the Thursday’s London open.
Risk tone has been heavy off-late as sluggish activity data from China and the US-China trade tussle triggered the first in more than a decade yield curve inversion of the US 10-year and 2-year Treasuries. Adding to the sentiment is the latest drop of the US 30-year treasury yield to the record low under 2.0%.
At the domestic front, the opposition Labour party leader Jeremy Corbyn vowed to table no-confidence vote as soon as he feels confident of getting full support for it during early September. Reuters also quotes Mr. Corbyn while preparing for Brexit delay and heading an intermediate government if the Prime Minister (PM) Boris Johnson fails in the parliament vote. Additionally, The Guardian reported the news that the PM Johnson sparks cross-party backlash with his comments over ‘Brexit’ collaboration.
On the positive side, the UK’s Royal Marines agreed to release Iranian oil tanker, seized a month ago in Gibraltar, which in turn might ease the tension between the nations.
While the Cable becomes the last currency to react on the trade news, the UK/US Retail Sales numbers will be the key to search for fresh direction.
The UK Retail Sales are likely to weaken from 3.8% and 1.0% to 2.6% and -0.2% on YoY and MoM respectively. Further, Retail Sales ex-fuel could also weaken to -0.2% and +2.3% from 0.9% and 3.6% marks on a monthly and a yearly basis in the respective pattern. On the other hand, the US Retail Sales growth is also expected to weaken to 0.3% versus 0.4% prior whereas the headline Retail Sales Control Group could dip to 0.3% from 0.7% earlier.
Technical Analysis
1.2095-1.2100 becomes near-term key resistance holding the gate for the pair’s rise to a monthly high near 1.2210 while 1.2000 and 2017 low near 1.1987 will entertain sellers ahead of pushing them towards 2016 bottom surrounding 1.1806.
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