GBP/USD remains on the defensive below 1.3600 mark on dismal UK Retail Sales

The GBP/USD remained on the defensive following the release of dismal UK macro data and was last seen hovering near the weekly low, around the 1.3585 region.

The pair extended the previous day's sharp retracement slide from the 1.3660 area and witnessed some selling through the first half of the trading on Friday. The British pound continues to be weighed down by the UK political crisis amid growing demands for Prime Minister Boris Johnson's resignation over a series of lockdown parties in Downing Street.

Apart from this, a slump in the UK monthly Retail Sales further undermined sterling and dragged the GBP/USD pair lower for the second successive day. In fact, the UK's Office for National Statistics reported that the total value of inflation-adjusted sales at the retail level plunged 3.7% in December as against market expectations for a fall of 0.6%.

That said, increasing bets for additional rate hikes by the Bank of England, along with the announcement that COVID-19 restrictions in the UK would be lifted next week, helped limit losses for the GBP/USD pair. Moreover, subdued US dollar demand was seen as another factor that held back traders from placing aggressive bearish bets around the major.

The mixed fundamental backdrop warrants some caution before positioning for an extension of the recent pullback from the vicinity of mid-1.3700s, or the highest level since October touched last week. Moreover, investors might also prefer to move on the sidelines ahead of the upcoming central bank event risk – the FOMC meeting on January 25-26.

Technical levels to watch