- The GBP/USD outlook suggests robust consumer spending in the UK.
- UK consumer confidence plunged in April.
- The dollar regained its shine amid easing US-China trade tensions.
The GBP/USD outlook suggests robust consumer spending in the UK. However, consumer confidence fell sharply in April due to the ongoing global trade wars. Meanwhile, the dollar remained strong as sentiment improved due to easing tensions between China and the US.
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Data released on Friday showed that UK retail sales rose by 0.4%, contrary to initial estimates of a 0.3% decline. The jump was a sign that consumer spending was strong. However, analysts remain cautious about incoming data as they await the impact of Trump’s tariffs on the economy. The BoE governor said on Thursday that he expects a significant impact on growth, particularly from the US-China trade war.
A separate report on Friday revealed that consumer confidence plunged in April. This is a sign that consumers are expecting difficult times ahead. Consequently, the pound remained muted.
Meanwhile, the dollar regained its shine after reports revealed easing trade tensions between China and the US. On Friday, China announced that it was ready to exempt certain US goods, including medical equipment, from tariffs. On the other hand, top US officials have said they are willing to lower China tariffs to 50% and start negotiations.
GBP/USD key events today
Market participants do not expect any key releases from the US or the UK. Therefore, they will continue to digest the UK retail sales numbers.
GBP/USD technical outlook: Decline pauses to retest the 30-SMA
On the technical side, the GBP/USD price is caught between the 30-SMA and the 0.236 Fib retracement level. Bears have the upper hand because the price is below the SMA. Recently, sentiment shifted when the previous uptrend met the 1.3401 resistance. Here, bears overtook bulls and pushed the price below the 30-SMA.
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The decline paused at the 0.236 Fib, allowing GBP/USD to retest the recently broken SMA. If the SMA holds firm, bears will have to break below the Fib level and the 1.3200 support to confirm a new downtrend.
On the other hand, if bulls are stronger, the price will break above the SMA to retest the 1.3401 resistance. A break above this level will strengthen the bullish bias, as it would result in a higher high.
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Saqib Iqbal
