GBP/USD trips down on woes about global economic growth, also on a solid USD

GBP/USD dropped from around weekly highs nearby the 1.2780s due to flows towards safe-haven currencies like the US Dollar (USD), as data from the second largest economy reignited woes for a worldwide economic deceleration. At the time of writing, the GBP/USD exchanges hands at 1.2737, down 0.36%, in the mid-North American session.

Unfavorable Chinese economic data and UK retail sales figures put pressure on GBP/USD, despite a more neutral stance from some Fed officials

The GBP/USD resumed its downtrend on sentiment shifting sour after the Chinese trade balance showed that Imports and Exports plunged below estimates and the prior month’s readings, opening the door for a global economic slowdown.

Aside from this, data revealed in the United Kingdom (UK) showed that retail sales rose 1.5% vs. 4.9% YoYs, down from the current year’s peak of 5.2% in February. British consumers have weathered high inflation during the year, despite efforts from the Bank of England (BoE) to curb sticky elevated prices.

Across the pond, the economic docket in the United States (US) revealed that its trade deficit shrank in June, as revealed by the US Commerce Department. Exports rose by $247.5 billion, below May’s $247 billion, while Imports dipped to $313 billion from $316.1 billion the prior’s month. Hence, the Trade Balance came at $-65.5, a tick higher than the $-65 billion estimated but below the previous reading of $-68.3 billion.

US Treasury bond yields are extending their losses, despite overall US Dollar strength. The US 10-year benchmark note rate sits at 4.022%, losses seven basis points, while the US Dollar Index (DXY) portrays the greenback gaining 0.52%, at 102.612.

Fed speakers’ comments keep the GBP/USD from falling further as a more neutral stance begins to be adopted. Philadelphia Fed President Patrick Harer said the Fed “can leave interest rates where they are.” However, he added, “Absent any alarming new data between now and mid-September,” the Fed can be “patient and hold rates steady.” Echoing some of his comments was Atlanta’s Fed President Raphael Bostic, saying no more increases are necessary.

Contrarily, the Federal Reserve (Fed) Governor Michell Bowman stated that more rate increases are needed.

The US economic docket will feature the July inflation data release ahead of the week. On the UK front, Gross Domestic Product (GDP) for Q2 and June is estimated to show an improvement, as shown by the market consensus.

GBP/USD Price Analysis: Technical outlook

The GBP/USD daily chart portrays a two-candlestick bearish reversal pattern, known as a ‘bearish-engulfing,’ which warrants further downside is expected. Nevertheless, the 50-day Exponential Moving Average (EMA) at 1.2743 capped the GBP/USD’s fall. A daily close below the latter would put a challenge at the 1.2700 psychological level into play. Once that level is surpassed, the next stop would be the August 3 daily low of 1.2620. Conversely, if GBP/USD closes above the 50-day EMA, that could pave the way for a recovery toward 1.2800. Once cleared, the next supply area to test would be the 20-day EMA at 1.2807, ahead of reaching a downslope resistance trendline at around 1.2860/80.