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  • GBP/USD extends the previous day’s recovery moves, refreshes intraday low.
  • China sanctions UK over Xinjiang comments, sentiment dwindles but US dollar eases.
  • EU-UK debates over vaccine sharing while Brussels pushes for more, CBI sees better times for UK retailers after difficult March.
  • British Retail Sales, US Core PCE and risk catalysts can offer an active day ahead.

GBP/USD refreshes intraday high around 1.3755, up 0.15% on a day, during early Friday. In doing so, the quote cheered the recent recovery in the market sentiment while ignoring China’s sanctions on the UK ahead of the key British Retail Sales figures for March.

Market sentiment improves as hopes of further stimulus join the Fed’s strong rejection of reflation fears. Also supporting the mood could be US President Joe Biden’s push for faster vaccinations and upbeat US data.

On the contrary, China’s sanction on British firms and individuals over comments on Xinjiang should have probed the GBP/USD bulls. Beijing doesn’t even stop at this and signals it may take further actions. Additionally, European leaders’ fear of darker days ahead with the third coronavirus (COVID-19) wave also flash negative signals for the markets.

Although Brussels struggle for the vaccine, the bloc leaders kept using harsh words to push Britain over foregoing some of its AstraZeneca claims. However, Dutch PM Mark Rutte seemed to be an exception while saying, per Reuters, “Britain and the European Commission could soon resolve a dispute over AstraZeneca.”

Elsewhere, a British diplomat came out with the news suggesting that the nation’s export of meat and seafood to the bloc recovered in February versus January slump. Also on the positive side could be the comments from the Confederation of British Industry (CBI) suggesting expectations for retail sales turning positive in March for the first time since December 2019. It’s worth mentioning that the GBP/USD buyers may also have cheered the government’s further 1.5 billion pounds ($2.06 billion) in tax relief for companies hit by the coronavirus crisis but which until now had not qualified for exemption from paying business rates, per Reuters.

Against this backdrop, S&P 500 Futures rise 0.20% whereas US 10-year Treasury yields add 1.8 basis points to stay above 1.60%. Further, the US dollar index (DXY) eases from the fresh multi-day high marked the previous day.

Moving on, GBP/USD traders should keep their eyes on the UK Retail Sales for February, expected +2.1% MoM versus -8.2% for fresh impulse. Also important will be the Fed’s preferred gauge of inflation, namely Core PCE data.

Read:  The February Grab-Bag Preview: Personal Income, Spending, Core PCE Prices and GDP

Technical analysis

Unless regaining above the early month low near 1.3780, GBP/USD remains vulnerable to the downside.