The GBP/USD pair fell to a day’s low of 1.3434, a drop of 0.52%. This decline followed US economic reports that support the Federal Reserve’s current monetary policy, while UK Retail Sales performed poorly. Initial US Jobless Claims surpassed expectations, showing economic strength despite a decline in manufacturing, according to S&P Global. US Durable Goods Orders dropped by 9.6% in June, shifting down from a 16.5% growth in May, although analysts had expected a decline of 10.8%. In contrast, Core Durable Goods Orders rose by 0.2%. President Trump announced that most US trade deals are close to completion, with possible tariffs of 10% to 15%. He mentioned a 50-50 chance for a deal with the EU.

UK Retail Sales And Its Implications

UK Retail Sales grew by 0.9% in June, but this was below the expected 1.2%. Compared to the previous year, sales increased by 1.7%, missing the 1.8% estimate following a 1.3% decline. This disappointing performance raises concerns about a potential rate cut by the Bank of England. GBP/USD technical analysis suggests potential for an upward trend, even after falling below the 50-day Simple Moving Average. If the pair continues to drop, it may test support levels at 1.3369 and 1.3320. Conversely, a rise past 1.3450 could lead to a test at the 1.3500 resistance level. This week, the British Pound showed mixed results against major currencies. The main factor affecting the pound’s value against the dollar is the growing difference in monetary policy outlooks. The weak British consumer spending raises expectations for a Bank of England rate cut, with money markets now pricing in a 60% chance of a cut by August. This stands in stark contrast to the American central bank’s more cautious approach.

American Data And Dollar Strength

American data also supports a stronger dollar, making bearish strategies on the GBP/USD pair more appealing. The addition of 272,000 jobs in the last reported month greatly exceeded expectations and overshadows the drop in durable goods orders. Comments from the administration regarding trade deals add some volatility, but the solid economic strength of the US supports the currency. Given this scenario, we may consider buying put options to benefit from potential declines toward the 1.3369 support level. Selling out-of-the-money call options or creating bear call spreads could also be wise strategies to gain premiums while betting against a significant rise past the 1.3500 mark. The break of the key moving average supports this bearish outlook in the near future. However, we should stay alert since UK inflation recently returned to the 2.0% target for the first time in nearly three years, which may make policymakers cautious about a rate cut. Any unexpectedly strong economic data from the UK or a shift towards dovishness from the US central bank may challenge this perspective. The sterling has historically shown sharp reversals following policy surprises, as evidenced during the 2022 budget crisis, so it’s crucial to manage risks carefully. Create your live VT Markets account and start trading now.

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