GBP/USD Outlook: Minor Gains Amid Positive UK Retail Data

• Economists believe a rate cut in the UK is nearing.

• UK sales rose 2.9% in May after a 1.8% fall in April.

• Market participants are awaiting the US PCE price index report.

The GBP/USD outlook is bearish despite a slight recovery in the pound after upbeat retail sales data. The currency remains near recent lows amid an increase in expectations for a Bank of England rate cut. Meanwhile, the dollar pulled back slightly on Monday as traders geared up for more US inflation data. 

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After Thursday’s Bank of England meeting, economists believe a rate cut in the UK is nearing. The central bank held rates, but policymakers were more comfortable with the idea of cutting rates. As a result, the pound fell after the meeting.

However, this move reversed slightly on Friday after the UK retail sales report. Notably, sales rose by 2.9% in May after a 1.8% fall in April. Moreover, this was much bigger than economists’ expectations of a 1.5% increase. This increase in consumer spending shows high demand that challenged the outlook for rate cuts.

Meanwhile, the US dollar surged last week after a rate cut by the Swiss National Bank highlighted the delay in Fed rate cuts. However, rate cut expectations remained mostly stable after softer-than-expected inflation readings for May.

On Friday, the US released PMI data showing the level of business activity in the economy. Notably, the manufacturing and services sectors expanded more than expected, leading to a rally in the dollar. Market participants are now awaiting the US PCE price index report, which will be released on Friday. Economists expect the annual figure to slow to 2.6%.

GBP/USD key events today

Investors do not expect any major reports from the UK or the US. Therefore, the pair might consolidate. 

GBP/USD technical outlook: Temporary rebound meets trendline resistance

On the technical side, the GBP/USD price is rebounding after making a new low. However, the bearish bias remains intact because the price trades below the 30-SMA with the RSI in bearish territory below 50. Therefore, the rebound might only be temporary before the downtrend continues. 

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The price is currently facing its resistance trendline and might stop and reverse lower. However, if it breaks above, more resistance will be at the 30-SMA line and the 1.2700 level. When bears resume the downtrend, they will target the 1.2600 psychological level.

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