GBP/USD holds above the 1.2700 mark ahead of UK Retail Sales, Michigan sentiment data

GBP/USD gains traction around 1.2708 amid the weaker USD, risk-on sentiment.
UK CPI inflation rose for the first time in 10 months, rising to 4.0% YoY vs. 3.9% prior.
Fed’s Bostic expects that policymakers will begin cutting interest rates in the third quarter of this year.
Traders await the December UK Retail Sales and the preliminary US Michigan Consumer Sentiment Index, due on Friday.

Lallalit Srijandorn FXStreet

The GBP/USD pair trades firm for the third consecutive day during the early Asian session on Friday. The uptick in the major pair is bolstered by the upbeat UK inflation data and the risk-on mood. Investors await the UK Retail Sales report on Friday for fresh impetus, which is estimated to show a decline of 0.5% MoM in December from a 1.3% rise in November. GBP/USD currently trades near 1.2708, up 0.08% on the day.

The annual rate of the UK Consumer Price Index (CPI) rose to 4.0% YoY from 3.9% in November, undermining market expectations of an early rate cut by the Bank of England (BoE). This figure marked the first acceleration in ten months. The former BoE policymaker, Michael Saunders, said that he did not think the latest data contradicted the broader underlying decline in inflation.

Nonetheless, traders slashed their bets on BoE rate cuts. The markets have priced in a 50% odds of a quarter-point cut to borrowing costs by the BoE in May, down from an 80% chance on Tuesday. This, in turn, lends some support to the British Pound (GBP) and acts as a tailwind for the GBP/USD pair.

Late Thursday, Atlanta Federal Reserve (Fed) President Raphael Bostic anticipates that policymakers will begin cutting interest rates in the third quarter of this year as inflation is approaching the central bank’s target. The fed funds futures market is pricing in the first rate cuts as early as March, according to the CME FedWatch tool. However, the implied probability of a quarter percentage point rate cut has declined in recent days to 57% on Thursday morning.

Moving on, investors will keep an eye on the UK Retail Sales for December and the preliminary US Michigan Consumer Sentiment Index on Friday. Market participants will take cues from the data and find trading opportunities around the GBP/USD pair.

GBP/USD

Overview
Today last price	1.2709
Today Daily Change	0.0010
Today Daily Change %	0.08
Today daily open	1.2699

Trends
Daily SMA20	1.2713
Daily SMA50	1.2628
Daily SMA100	1.2452
Daily SMA200	1.255

Levels
Previous Daily High	1.2704
Previous Daily Low	1.2648
Previous Weekly High	1.2786
Previous Weekly Low	1.2674
Previous Monthly High	1.2828
Previous Monthly Low	1.2501
Daily Fibonacci 38.2%	1.2683
Daily Fibonacci 61.8%	1.267
Daily Pivot Point S1	1.2664
Daily Pivot Point S2	1.2628
Daily Pivot Point S3	1.2608
Daily Pivot Point R1	1.2719
Daily Pivot Point R2	1.2739
Daily Pivot Point R3	1.2775

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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