GBP/USD stays pressured towards 1.2300 ahead of UK Retail Sales, Fed’s favorite inflation

• GBP/USD stays depressed at the lowest levels in seven week after falling in the last four consecutive days.
• Broad US Dollar strength amid cautious markets, hawkish Fed talks and firmer US data weigh on Pound Sterling.
• US debt ceiling negotiations remain dicey, the latest easing of differences appears promising.
• UK Retail Sales, US Durable Goods Orders and PCE Price Index will be important to watch on the calendar.

GBP/USD bears take a breather at the lowest levels since early April, making rounds to 1.2320-25 after falling in the last four consecutive days. In doing so, the Cable pair bears the burden of the upbeat US data, hawkish Federal Reserve bets and the market’s rush towards US Dollar amid the looming US default. That said, the hawkish comments from the Bank of England (BoE) officials fail to inspire the Cable pair buyers ahead of today’s UK Retail Sales and a slew of the US data.

On Thursday, the second estimation of the US Annualized Gross Domestic Product (GDP) for Q1 2023 was revised up to 1.3% versus 1.0% first forecasts. Further, the Chicago Fed National Activity Index for April improved to 0.07 from -0.37 prior and -0.02 market estimations. On the same line, Kansad Fed Manufacturing Activity improved to -2 for May compared to -21 previous readings and analysts’ estimations of -11. It’s worth noting that the US Pending Home Sales for April improved on YoY but eased on MoM whereas Core Personal Consumption Expenditures also rose to 5.0% during the preliminary readings versus 4.9% prior.

At home, the UK energy regulator, Ofgem, announced a reduction in its price cap on household energy bills from July to an annual level of GBP2,074 ($2,617.60) for a typical dual-fuel household. The same could help the UK to ease inflation and could provide headwinds to the GBP/USD pair.

That said, Bank of England (BoE) policymaker Jonathan Haskel recently said, “Further increases in bank rates cannot be ruled out.” On the contrary, Richmond Fed President Thomas Barkin said, “Fed is in a test and learn situation to determine how slowing demand lowers inflation.” On the different front, Boston Federal Reserve President Susan Collins said on Thursday that the Fed "may be at or near" the time to pause interest rate increases, as reported by Reuters.

It’s worth noting that the market’s recent disbelief in the BoE officials’ hawkish comments and ignorance of the upbeat British data keeps the Pound Sterling on the bear’s radar, especially amid firmer US data and the calls for further rate hikes from the Federal Reserve.

Additionally,  the concerns about US policymakers’ inability to clinch a deal on the US debt ceiling extension, as well as the latest chatters suggesting a $70.0 billion gap left to be filled by the negotiators to get the much-awaited deal also weigh on the GBP/USD prices, via the firmer US Dollar and yields.

That said, the US Dollar Index (DXY) rose to the highest levels in 10 weeks, to 104.20 at the latest, whereas the US 10-year and two-year Treasury bond yields rose to the early March highs of around 3.82% and 4.54% in that order.

Looking ahead, the UK Retail Sales for April, expected 0.3% MoM versus -0.9% prior, will precede a slew of the US data to direct intraday moves of the GBP/USD pair. Among them, the US Durable Goods Orders for April and the Core Personal Consumption Expenditure (PCE) Price Index for the said month, known as the Fed’s preferred inflation gauge, will be crucial to watch. Above all, US debt ceiling negotiations should be traced for clear directions.

Technical analysis

With a clear downside break of the 50-DMA and the Cable pair’s sustained observance of a two-week-old resistance line, respectively near 1.2435 and 1.2370, the GBP/USD pair remains all set to prod the 100-DMA support of around 1.2285.