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GBP/USD steadies below 1.3450 following BRC Like-For-Like Retail Sales, UK labor data eyed

  • GBP/USD holds ground ahead of UK labor market data release due on Tuesday.
  • BRC Like-For-Like Retail Sales climbed 1.8% YoY in July, against the expected 2.1% increase.
  • US inflation data is awaited that could influence the Federal Reserve’s interest rate outlook.

GBP/USD moves little after the release of Like-For-Like Retail Sales by the British Retail Consortium, hovering around 1.3430 during the Asian hours on Tuesday. Focus is shifted toward the United Kingdom (UK) labor market data, including Claimant Count Change, Employment Change, and ILO Unemployment Rate, scheduled to be released later in the day.

BRC Like-For-Like Retail Sales rose 1.8% year-on-year in July, slowing from a 2.7% gain in June and falling short of the expected 2.1% increase. Helen Dickinson, Chief Executive of the British Retail Consortium, cautioned that current sales growth is hardly sufficient to offset the £7 billion in new costs imposed on retailers in the last Budget.

The GBP/USD pair may gain ground as the Pound Sterling (GBP) could receive support amid improving market sentiment ahead of the upcoming United States (US)-Russia meeting on Friday. US President Donald Trump and Russian President Putin will meet in Alaska on August 15, with an aim to finding a resolution to the conflict in Ukraine. However, Ukrainian President Volodymyr Zelenskyy is reportedly not expected to participate.

Traders will likely focus on the US consumer inflation data, due later in the North American session, as it could shape the Federal Reserve’s (Fed) interest rate outlook. The July Consumer Price Index (CPI) is forecast to rise 0.2%, slightly below June’s 0.3%, while the annual rate is projected to accelerate for the third consecutive month to 2.8%. Core CPI is also anticipated to pick up to 0.3%. Markets are now pricing in approximately 84% odds of a Fed rate cut at the September meeting, down from 90% a week ago, according to the CME FedWatch tool.

Pound Sterling FAQs

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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