- GBP/USD holds lower ground near weekly bottom, recently inactive.
- EU sees no fundamental change in UK’s Brexit stance, warns of end to opportunity window next month.
- UK PM removes “Plan B” measures but fails to overcome political angst, BOE may announce another rate hike in February.
- Market sentiment dwindles amid pre-Fed concerns, UK Retail Sales may bolster hawkish BOE bets.
GBP/USD differs from other risk-sensitive currency pairs to remain inactive around 1.3590-95 during early Friday. In doing so, the cable pair struggles to justify the risk-off mood amid contrasting signals concerning Brexit and the Bank of England’s (BOE) next move ahead of the key UK Retail Sales for December.
Following the first Brexit meeting with the UK’s representative Liz Truss, the European Union (EU) policymakers reiterated their disappointment with ex-neighbor. “The European Union’s Brexit negotiator told lawmakers behind closed doors that a window of opportunity to strike a deal with the U.K. will close late next month, also cautioning that he has yet to see a fundamental change in London’s stance despite a positive shift in tone,” said Bloomberg. Elsewhere, the UK-India trade deal also lingers amid multiple issues ranging from alcohol to dairy.
Alternatively, strong UK inflation renews hopes of another BOE rate hike in February, which in turn keeps GBP/USD buyers hopeful. The Bank of England will press ahead with its tightening cycle next month as red-hot inflation runs well ahead of target and the economic threat from the Omicron coronavirus variant should prove milder than previous mutations,” per the latest Reuters poll.
It should be noted that the reduction in the virus-led activity restrictions and recently easing covid cases also help GBP/USD to battle the risk-off mood taking clues from the Fed rate hike expectations. The hawkish Fed bets grew after US Treasury Secretary Janet Yellen said during a CNBC interview, “Inflation rose by more than most economists, including me, expected and of course, it's our responsibility with the Fed to address that. And we will.”
Elsewhere, UK PM Boris Johnson remains pressured to leave the PM post due to a controversial booze party during the covid times. Even so, some among the supporters claim that Johnson’s exit will reverse Brexit, which in turn helps the Tory Leader Boris to stay a bit relaxed.
Against this backdrop, the US 10-year Treasury yields posted a second consecutive daily loss, down six basis points to 1.77% at the latest, whereas the S&P 500 Future dropped 0.60% intraday by the press time.
Looking forward, UK Retail Sales for December, expected -0.6% MoM versus +1.4% prior, will be crucial for the GBP/USD prices as BOE bulls are flexing muscles after upbeat UK jobs and inflation figures. “We expect a sharp decline in December retail sales of 1.5% m/m (market forecast: -0.6%) with card spending data suggesting it might be even worse,” said TD Securities in this regard.
Technical analysis
Unless providing a daily closing below the 100-DMA level of 1.3540, GBP/USD sellers remain cautious.
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 clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.