- GBP/USD has steadied above 1.1800 during the European session.
- A weaker-than-expected US Retail Sales data could weigh on the dollar.
- Investors reassess the Fed's rate outlook on Governor Waller's dovish comments.
GBP/USD has recovered and steadied above 1.1800 early Friday after having suffered heavy losses on Thursday. Investors await key macroeconomic data releases from the US and the dollar could face selling pressure in case the probability of a 100 basis points (bps) rate hike in July continues to decline.
The dollar rally that was triggered by hot US inflation data on Wednesday stayed intact on Thursday and the US Dollar Index (DXY) reached its strongest level in nearly 20 years at 109.29 during the American session.
After Federal Reserve Governor Christopher Waller said that markets may have gotten ahead of themselves by pricing a 100 basis points rate hike in July, however, the DXY erased a large portion of its daily gains. Regarding the July rate decision, Waller said he was in favour of a 75 bps increase but noted that he could lean toward a bigger hike if retail sales and housing data come in stronger than expected.
Retail Sales in the US are expected to increase by 0.8% on a monthly basis in June following May's 0.3% contraction. If this data comes in stronger than expected, it could help the dollar regather its strength. Following Waller's remarks, the probability of a 100 bps rate hike in July fell toward 50% from 90%. Hence, the DXY is likely to gain traction in case the sales data ramp up the 100 bps rate hike bets.
Later in the session, the University of Michigan (UOM) will release its Consumer Sentiment Survey for early July. Rather than the headline Consumer Confidence Index, the long-term inflation expectations component of the survey should trigger a significant market reaction. Following the decision to hike the policy rate by 75 basis points in June, FOMC Chairman Jerome Powell said rising long-term inflation expectations in the UOM's survey were one of the factors behind the aggressive rate increase. In June's final version, the 5-10 year ahead inflation expectation stood at 3.1% and the dollar rally could pick up steam if there is an uptick in that figure. On the other hand, the greenback could face additional selling pressure ahead of the weekend on a soft print.
GBP/USD Technical Analysis
GBP/USD continues to trade within the descending regression channel coming from late June and the Relative Strength Index (RSI) indicator on the four-hour chart stays below 50, suggesting that the bearish bias stays intact.
On the downside, 1.1800 (psychological level, static level) forms first support before 1.1760 (static level from March 2020, July 14 low) and 1.1700 (psychological level).
Resistances are located at 1.1850 (upper limit of the descending channel, 20-period SMA), 1.1900 (psychological level) and 1.1930 (50-period SMA).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks

EUR/USD declines toward 1.0450 on USD recovery
EUR/USD struggles to gain traction and declines toward 1.0450 on Tuesday despite the upbeat ZEW Survey - Economic Sentiment data for Germany and the Eurozone. Rising US Treasury bond yields support the US Dollar and weigh on the pair.

GBP/USD struggles to hold above1.2600
GBP/USD stays under modest bearish pressure and trades below 1.2600 on Tuesday. Earlier in the day, the pair edged higher with the initial reaction to the UK labor market data, which showed that the Unemployment Rate held steady at 4.4% in the three months to December.

Gold gathers bullish momentum, rises to $2,920 area
Gold builds on Monday's modest gains and rises to the $2,920 area on Tuesday. Markets brace for headlines to come in from Saudi Arabia, where US and Russian officials are meeting for peace talks. Meanwhile, rising US T-bond yields could limit XAU/USD's upside.

Canada CPI set to remain at 1.8% in January, fueling BoC easing stance
This Tuesday, Statistics Canada will unveil its latest inflation report for January, based on data from the Consumer Price Index (CPI). Early forecasts suggest that headline inflation held steady at 1.8% compared with January of last year.

Rates down under
Today all Australian eyes were on the Reserve Bank of Australia, and rates were cut as expected. RBA Michele Bullock said higher interest rates had been working as expected, slowing economic activity and curbing inflation, but warned that Tuesday’s first rate cut since 2020 was not the start of a series of reductions.

The Best Brokers of the Year
SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.