- June UK retail sales dropped by 0.1%, less than investors expected.
- The high cost of living crisis is causing declining sales in the UK.
- Consumer confidence in the UK is at a record low.
Today’s GBP/USD price analysis is bullish as UK retail sales came in higher than investors had expected for June. The Office for National Statistics reported a smaller-than-expected 0.1% drop in May’s retail sales when investors had expected a 0.3% drop.
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“After taking account of rising prices, retail sales fell slightly in June, and although they remain above their pre-pandemic level, the broader trend is one of decline,” Heather Bovill, an ONS statistician, said.
Rising inflation, driven by sky-high fuel costs, hurts the British economy.
“But even so, it is becoming clearer that the cost-of-living crisis is behind the steady decline in sales volumes in recent months,” Dales said. “We think a recession is just around the corner,” said Paul Dales, an economist with Capital Economics.
With this in mind, we can assume that the recent pound rally might just be a retracement from oversold conditions. The primary trend, which is down, might continue soon enough. Consumer confidence in the UK is at its lowest since 1974, further pointing to poor economic prospects.
GBP/USD key events today
GBP/USD investors will receive a lot of data from the UK later today, including composite, manufacturing, and services PMI, all of which are expected to drop. This report will show the activity level of purchasing managers in the manufacturing and services sectors.
Investors will also pay attention to the commitment of traders report from the Commodity Futures Trading Commission. It will break down net speculative positions for the pound and the US dollar.
GBP/USD technical price analysis: Downtrend sustains below 1.20252
Looking at the 4-hour chart, we see the price riding the 30-SMA from above, showing bulls are experiencing a lot of resistance. The price is trading above the SMA, and the RSI is slightly above 50, favoring bullish momentum.
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Bears are trying to push the price below the SMA, hence the consolidation. Bears might bring back the downtrend if bulls cannot get enough momentum to retest and break above the July 20 resistance at 1.20252. A break below the SMA would mean a possible retest of the July 14 support at 1.17709.
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Saqib Iqbal
